Why a Finite World is a Problem

Why is a finite world a problem? I can think of many answers:

1. A finite world is a problem because we and all of the other creatures living in this world share the same piece of “real estate.” If humans use increasingly more resources, other species necessarily use less. Even “renewable” resources are shared with other species. If humans use more, other species must use less. Solar panels covering the desert floor interfere with normal wildlife; the use of plants for biofuels means less area is available for planting food and for vegetation preferred by desirable insects, such as bees.

2. A finite world is governed by cycles. We like to project in straight lines or as constant percentage increases, but the real world doesn’t follow such patterns. Each day has 24 hours. Water moves in waves. Humans are born, mature, and die. A resource is extracted from an area, and the area suddenly becomes much poorer once the income from those exports is removed. Once a country becomes poorer, fighting is likely to break out. A recent example of this is Egypt’s loss of oil exports, about the time of the Arab Spring uprisings in 2011 (Figure 1). The fighting has not yet stopped. 

Figure 1. Egypt's oil production and consumption, based on BP's 2013 Statistical Review of World Energy data.

Figure 1. Egypt’s oil production and consumption, based on BP’s 2013 Statistical Review of World Energy data.

The interconnectedness of resources with the way economies work, and the problems that occur when those resources are not present, make the future much less predictable than most models would suggest.

3.  A finite world means that we eventually run short of easy-to-extract resources of many types, including fossil fuels, uranium, and metals.  This doesn’t mean that we will “run out” of these resources. Instead, it means that the extraction process will become more expensive for these fuels and metals, unless technology somehow acts to hold costs down. If extraction costs rise, anything made using these fuels and metals becomes more expensive, assuming businesses selling these products are able to recover their costs. (If they don’t, they go out of business, quickly!) Figure 2 shows that a recent turning point toward higher costs came in 2002, for both energy products and base metals.

Figure 2. World Bank Energy (oil, natural gas, and coal) and Base Metals price indices, using 2005 US dollars, indexed to 2010 = 100.  Data source: World Bank.

Figure 2. World Bank Energy (oil, natural gas, and coal) and Base Metals price indices, using 2005 US dollars, indexed to 2010 = 100. Base metals exclude iron. Data source: World Bank.

4. A finite world means that globalization will prove to be a major problem, because it added proportionately far more humans to world demand than it added undeveloped resources to world supply. China was added to the World Trade Organization in December 2001. Its use of fuels of all types skyrocketed quickly soon afterward (Figure 3, below). As noted in Item 3 above, the turning point for prices of fuels and metals was in 2002. In my view, this was not a coincidence–it was connected with rising demand from China, as well as the fact that we had extracted a considerable share of the cheap to extract fuels earlier.

Figure 3. Energy consumption by source for China based on BP 2013 Statistical Review of World Energy.

Figure 3. Energy consumption by source for China based on BP 2013 Statistical Review of World Energy.

5. In a finite world, wages don’t rise as much as fuel and metal extraction costs rise, because the extra extraction costs add no real benefit to society–they simply remove resources that could have been put to work elsewhere in the economy. We are, in effect, becoming less and less efficient at producing energy products and metals. This happens because we are producing fuels that are located in harder to reach places and that have more pollutants mixed in. Metal ores have similar problems–they are deeper and of lower concentration. All of the extra human effort and extra resource expenditure does not produce more end product. Instead, we are left with less human effort and less resources to invest in the rest of the economy. As a result, total production of goods and services for the economy tends to stagnate.

In such an economy, workers find that their inflation-adjusted wages tend to lag. (This happens because the total economy produces less, so each worker’s share of what is produced is less.) Companies producing energy and metal products are also likely to find it harder to make a profit, because with lagging wages, consumers cannot afford to buy very much product at the higher prices. In fact, there is likely to be the danger of an abrupt drop in production, because prices remain too low to justify the high cost of additional investment.

6. When workers can afford less and less (see Item 5 above), we end up with multiple problems:

a. If workers can afford less, they cut back in discretionary spending. This tends to slow or eventually stop economic growth. Lack of economic growth eventually affects stock market prices, since stock prices assume that sale of their products will continue to grow indefinitely.

b. If workers can afford less, one item that is increasingly out of reach is a more expensive home. As result, housing prices tend to stagnate or fall with stagnating wages and rising fuel and metals prices. The government can somewhat fix the problem through low interest rates and more commercial sales–that is why the problem is mostly gone now.

c. If workers find their wages lagging, and some are laid off, they increasingly fall back on government services. This leaves governments with a need to pay out more in benefits, without being able to collect sufficient taxes. Thus, governments ultimately end up with financial problems, if extraction costs for fuels and metals rise faster than can be offset by innovation, as they have been since 2002.

7. A finite world means that the need for debt keeps increasing, at the same time the ability to repay debt starts to fall. Workers find that goods, such as cars, are increasingly out of their ability to pay for them, because car prices are affected by the rising cost of metals and fuels. As a result, debt levels need to rise to buy these cars. Governments find that they need more debt to pay for all of the services promised to increasingly impoverished workers. Even energy companies find a need for more debt. For example, according to today’s Wall Street Journal,

Last year, 80 big energy companies in North America spent a combined $50.6 billion more than they brought in from their operations, according to data from S&P Capital IQ. That deficit was twice as high as in 2011, and four times as high as in 2010.

At the same time that the need for debt is increasing, the ability to pay it back is falling. Discretionary income of workers is lagging, because of today’s high prices of fuels and metals. Governments find it difficult to raise taxes. Fuel and metal companies find it hard to raise prices enough to  finance operations out of cash flow. Ultimately, (which may not be too in the future) this situation has to come to an unhappy end.

Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Figure 4. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Governments can cover up this problem for a while, with super low interest rates. But if interest rates ever rise again, the increase in interest rates is likely to lead to huge debt defaults, and major financial failures internationally. This happens because higher interest rates lead to a need for higher taxes, and because higher interest rates mean purchases such as  homes, cars, and new factories become less affordable. Rising interest rates also mean that the selling price of existing bonds falls, potentially creating financial problems for banks and insurance companies.

8. The fact that the world is finite means that economic growth will need to slow and eventually stop. We are already seeing slower economic growth in the parts of the world  that have seen a drop in oil consumption (European Union, the United States, and Japan), even as the rest of the world has seen rising oil consumption.

Figure 5. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 5. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

Countries that have had particularly steep drops in oil consumption, such as Greece (Figure 6 below), have had particularly steep drops in their economic growth, while countries with rapid increases in oil and other energy consumption, such as China shown in Figure 2 above, have shown rapid economic growth.

Figure 6. Oil consumption of Greece, Based on EIA data.

Figure 6. Oil consumption of Greece, Based on EIA data.

The reason why we are already reaching difficulties with oil consumption is because for oil, we are reaching limits of a finite world. We have already pulled out most of the easy to extract oil, and what is left is more expensive and slow to extract. World oil production is not rising very fast in total, and the price needs to be high to cover the high cost of extraction.  Someone has to be left out. The countries that use a large proportion of oil in their energy mix (like Greece, with its tourist trade) find that the products they produce are too expensive in a world marketplace. Countries that use mostly coal (which is cheaper), such as China, have a huge cost advantage in a cost-competitive world.

9. The fact that the world is finite has been omitted from virtually every model predicting the future. This means that economic models are virtually all wrong. The models generally predict that economic growth will continue indefinitely, but this is not really possible in a finite world. The models don’t even consider the fact that economic growth will scale back in mature economies.

Even climate change models include far too much future fossil fuel use, in both their standard runs and in their “peak oil” scenarios. This is convenient for regulators. Oil limits are scary because they indicate a possible near-term problem. If a climate change model indicates a need to cut back on future fossil fuel use, these models give the regulator a more distant problem to talk about instead.

10. Even the most basic economic relationships tend to be mis-estimated in a finite world. It is common for economists to look at relationships that worked in the past,  and assume that similar relationships will work now. For example, researchers like to look at how much debt an economy can afford relative to GDP, or how much debt a business can afford. The problem is that the amount of debt an economy or a business can afford shrinks dramatically, as the economic growth rates shrinks, unless the interest rate is extremely low.

As another example, economists believe that higher prices will lead to substitutes or a reduction in demand. Unfortunately, they have never stopped to consider that the reduction in demand for an energy product might have a serious adverse impact on the economy–for example, it could mean many fewer jobs are available. Fewer jobs mean less demand (or affordability), but is that what is really desired?

Economists also seem to believe that prices for oil products will keep rising, until they eventually reach the price level of substitutes. If people are poorer, this is not necessarily the case, as discussed above.

11. Besides energy products and metals, there are many other limits that are a problem in a finite world. There is already an inadequate supply of fresh water in many parts of the world. This problem can be solved with desalination, but doing so is expensive and takes resources away from other uses.

Arable land in a finite world is subject to limits. Soil is subject to erosion and degrades in quality if it is mistreated. Food is dependent on oil, water, arable land, and soil quality, so it quickly reaches limits if any of these inputs are disturbed. Pollinating insects, such as bees, are also important.

Probably the biggest problem in a finite world is the problem of too high population. Before fossil fuel use was added, the world could feed only 1 billion people. It is not clear that even that many could be fed today, without fossil fuels. The world’s population now exceeds 7 billion.

Where We Are Now in a Finite World

At this point, the problem of hitting limits in a finite world has morphed into primarily a financial problem. Governments are particularly affected. They find that they need to borrow increasing amounts of money to provide promised services to their citizens. Debt is a huge problem, both for governments and for individual citizens. Interest rates need to stay very low, in order for the current system to “stick together.”

Governments are either unaware of the true nature of their problems, or are doing everything they can to hide the true situation from their constituents. Governments rely on economists for advice on what to do next. Economists’ models do a very poor job of representing today’s world, so they provide little useful guidance.

The primary way of dealing with limits seems to be “solutions” dictated by concern over climate change. These solutions are of questionable benefit when it comes to the real limits of a finite world, but they do make it look like politicians are doing something useful. They also provide a continuing revenue stream to academic institutions and “green” businesses.

The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last. Will interest rates rise, and undo the happy situation? Or will a different financial problem (for example, a debt problem in Europe or Japan) bring the house of cards down? Or will the ultimate problem be a decline in oil supply, perhaps caused by oil and gas companies reaching debt limits?

2014 will be an interesting year. Let’s all keep our fingers crossed as to how things will work out. It is surreal how close we can be to limits, without major media catching on to what the problem really is.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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437 Responses to Why a Finite World is a Problem

    • Chris Johnson says:

      EOM

      Good response to Danny. Unfortunately there was no ‘reply’ tag available, so this response is probably out of order. Re strategic resources and economic growth, have you noticed how Emperor Xi’s first visit was to Czar Vladimir to arrange continuing petroleum deliveries (PRC funding the pipeline…). Then to the Middle East, then to Oz, Africa, etc. The difference between owning it and buying it may not be so great if you can strike the right deals — like sending your own companies and labor to do all the work…
      Chris

      • Every ruler, of whatever political colour, is forced by circumstance to promote the needs of his own nation/people. If he doesn’t then sooner or later he will be ousted from office. So those who rule china have to put China at the forefront in the energy race. If that destroys other economies—tough. The chinese will continue to prosper.
        Except they wont of course, because when the world economy crashes, so does the Chinese. Starving Africans will not stand and watch shipments of food leave for China, nor will they be able to buy from anywhere else.
        That takes us to the terminal event: China, and the other major powers will refuse to accept that the world economy has crashed, and will resort to ‘traditional’ methods to correct things (to their benefit naturally). The only use for the millions of Chinese unemployed will be as cannon fodder, inflamed to fight to redress perceived wrongs by other nations. (That has always been the lot of unemployed youth, turn them into soldiers—sounds just like Germany in 1938 doesn’t it?) That means armed conflict over what’s left. Like I said—every war has been about resources so far—I don’t see the next one being any different.

        • edpell says:

          You wrote “Every ruler, of whatever political colour, is forced by circumstance to promote the needs of his own nation/people.” Unfortunately, this is not the case in the US. The ruler meet the needs of the owning class (1%) and the vast majority of citizens are too uninformed, lazy, and/or cowardly to do anything to promote their own needs. A social pyramid based on money has been the social structure for the last 6000 years. I do not expect this to change even with reduced energy resources. “Meet the new boss same as the old boss.”

          • I meant nation OR people too—the two do not necessarily go hand in hand in the short term. In the long term however–national dynamic forces will predominate at some point, but thats a slow process sometimes.
            Its inevitable that wealthy classes influence governments.
            Predominance of a certain class always disturbs the status quo, usually resulting in violence. We should not be surprised when this happens in the USA. Collective tempers snap, and you have violent revolution.
            As energy resources diminish, ‘money resources’ will diminish pro rata.
            As soon as energy availability goes, that pyramid is going to collapse

        • Chris Johnson says:

          EOM: Good thoughts but I have to debate a few of them with you.
          First, the ‘struggle for power’ in Beijing or any other capitol is mostly an internal struggle. Foreigners are ‘tools’ that the most skillful manipulator uses best.
          Second, the potential event that the TPTB in Beijing fear most is unrest leading to revolution. They will not repeat not inspire ‘mass movements’ to invade neighbors. Their is no longer a ‘People’s Liberation Army’ of peasants, but it’s still not achieved the levels of capability that its major competitors can field.
          Another way of looking at the problem is that having that many people is a bigger problem an advantage. They now acknowledge that. Now the leadership has the delightful task of finding jobs for 20 million people who graduate from high school every year. And they want them to live not in the countryside but in urban density.

          • I agree they want them to live in an urban environment, (perfectly logical in the circumstances of the present) but that leads to the next problem. that of food supply
            Urban density only functions when there is efficient food supply system between country and city, and that of course comes back to fuel again.
            Also without ‘unlimited’ fuel supplies, city dwellers become unemployed, as does the city itself.
            Don’t we open up some interesting worm-cans in here?

      • Christopher Johnson says:

        @ Xabier:

        Sir, I apologize for not earlier acknowledging your very complimentary remark about my summary of WWII. Unfortunately that particular piece of blog real estate had no more ‘reply / comment’ buttons, and I just let it go. Later it struck me that such insouciance would surely anger my mother, and her ghost if such exists, might be sorely tempted to kick my butt.

        Cheers, Chris

        On Tue, Jan 7, 2014 at 8:02 PM, Our Finite World wrote:

        > Gail Tverberg commented: “Thanks!” >

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  2. xabier says:

    Coming up against Limits in Europe:

    How about this from Spain: the Defence Ministry has announced that after many cuts since 2008, the military – 123,000 – can now field only 10,000 (!) truly combat-effective soldiers, airmen and sailors.

    It has no resources to equip and train the remainder properly.

    • That’s something I’ve been banging on about for years, armies subsist in 2 ways:
      1, they draw on the excess of the home nation,
      or 2, they must loot the excess of other nations.
      Armies consume, they do not produce. The same goes for all the factories that supply their materiel.
      This is the insanity of our ‘system’ that insists that defence jobs produce wealth and GDP.
      Referring to your comment about Hitler in the 30s, (the same applied to Japan) They did the same thing, cured unemployment by creating a militaristic regime based on consumption. So they created vast armies, then found this was unsustainable except by invading weaker nations. But of course once the invasion process starts, it must go on until the aggressor nation meets a stronger force or runs out of lootable resources.
      In the case of Japan and Germany, the stronger force was the USA, not in terms of better soldiers, but by having access to vastly greater supplies of resources with which to wage war.

      • I generally agree, but there is a temporary energy piece that was available back then, that is not available now.

        When there was a lot of coal and oil that could be pulled out of the ground very cheaply, a lot of debt could be used to finance the army, pay for the coal and oil, and generate jobs for people. A big part of what paid for World War II (and was enabled by debt) was the big gap between (the value provided by fossil fuels) and (the low cost of those fossil fuels). Now we are dealing with much more expensive fuels, so that option is gone.

        • Chris Johnson says:

          So I guess the next time when we have to send 100 American divisions and 50,000 combat aircraft to fight for the things that we thought we all believed in, we can expect anti-war protesters and greenies and economists and sociologists and all those movers and shakers and great thinkers to tell us what fools we all are…

          • I don’t think I put over my point very well about warfare. (I try to avoid long posts)
            Until our present era, (from 1914) while a state of war might exist between nations for years, set piece battles were generally fought in a day or two, because neither side had the means to sustain it for longer than that.
            The 1914/18 war was the first industrialised war, where physical combat could be sustained for months, purely on the output of industry. In that war they laid railway lines behind the front lines to maintain supplies. Previous wars used horses and carts.—The critical factor was power from cheap coal and oil. Problem was, WW1 generals had been trained in pre-industrial warfare,, hence the colossal slaughter.
            War became a conveyor belt, with incompetence and death at the end of it.
            Germany and Japan decided to carry on that model of industrialised warfare, relying on engine power to keep it going, failing to grasp the significance of resource balance, again—coal and oil availability. Instead they clung to nationalistic concepts of human superiority. (Every nation suffers from that)
            The suggestion of sending ‘100 divisions’ etc confirms that.
            In 1941 the USA could mobilise the power of Detroit to drive 100 divisions or whatever. Take a look at Detroit now, any bets on how may divisions could be driven out of there?
            Because without wheels, your 100 divisions are going nowhere.
            WW1 and 2 were powered by cheap energy, just as our ‘prosperous’ society since has been powered by cheap energy. Post 1945 it was realised that if people were kept happily employed producing and selling stuff to each other, they were less inclined to go to war. . But Oil coal and gas was still needed to sustain that economic ‘miracle’. Peace or war—we still have to burn fuel at a faster and faster rate to maintain ‘output’.
            We have now reached the point where we cannot maintain a war economy or a peace economy because we’ve run out of (cheap) resources, and just like the losing side in WW2, we refuse to acknowledge that fact. Instead we mentally employ the same tactics they did, insisting that ‘superior technology and human ingenuity’ is going to pull us through.
            This time we’re all on the losing side

      • Chris Johnson says:

        ‘An it’s Tommy this and Tommy that and chuck him out, the brute
        But it’s “Savior of his country” when the guns begin to shoot…’

        CWJ

        • xabier says:

          Chris

          Nearly every day I walk past one of the great US War Memorials and Cemeteries. As a friend remarked: so many white tombstones they look like snow.

          In one of the local pubs, there is a ceiling preserved from the 1940’s with the names and units of airmen written on what was for so many their last night before the daylight raids.

          Neither forgotten nor unappreciated.

          • Danny says:

            Couldn’t you argue that WW2 was all about oil or mostly and that we are in a hybrid situation of that right now. Germany needed more oil as did Japan, after the U.S cut of oil them. China has been securing many oil contracts that used to go to the U.S. If and when the Shale deposits run out we have to go back to the market to try to secure new contracts and my guess is that they will be more expensive and then what. I don’t know what kind of diplomacy Obama has but I did read that he has not done well with S.A. If interest rates climb with oil prices rising what does that do to our GDP. And as far as our GDP I am guessing it is all gov spending and FED spending…take those two out and I don’t think you have much of a GDP here. Sorry for bouncing all over the place. I wanted to add one last comment at the end of Gail’s piece she says that we are so close to collapse it is amazing how clueless media is. Well when I talked to people about our problems ahead they just roll their eyes and label me a nut job.these are people who are scientist with PHDS!!!!..they won’t listen to any kind of evidence or facts or even be open for debate! Ted

            • Chris Johnson says:

              Danny, that’s quite a menu. Let’s start with WWII. In Europe it was a reaction to the outcome of the War to End All Wars, that nobody in 1914 anticipated would be as destructive as it turned out to be. By WWII we had fascism, marxism-leninism and the East Asian varieties. Oil was not the cause celebre, but one of the proximate causes. Germany wanted oil, ergo Stalingrad. Lacking oil, Germany could not ultimately win despite the teutonic traditions and tightly bound society. But the Normandy Invasion just barely succeeded — if German Intell hadn’t been penetrated in the UK, they would undoubtedly have discovered that Patton’s ‘Main Force’ was a ruse, and would probably have slammed the invasion. Note that Ike actually anticipated failure and wrote a letter to that effect. Guts!
              Is shale going to run out? What might replace it? How does that effect US foreign policy and relations with allies, friends, non-friends, opponents, etc? Does the US need to continue spending gigabucks trying to resolve Middle East disputes merely to keep the oil markets stable and the product flowing? Why is that a task only the US can / should / must manage? KSA demands US protection but wants us out of the kingdom to prevent criticism by those who really hate the Great Satan… Similarly with Iran: are there any areas where common alignment — if not outright alliance — could be useful? Alternatively, should the US (and Europe, et al) try to help the Muslims resolve the Sunni-Shia dispute that’s only been going on for about 1200 years? And it’s a little more important to the Muslims than oil, Danny.
              So what do you think we ought to do? I think the US President should base policies on the interests of the country as a whole, followed closely by considerations of our relationships with our best allies (UK, then NATO, Japan, et al).
              Obama tried to line up with the democratic Islamists in Egypt, with Erdogan in Turkey, and similar minded ‘apparently liberal’ Muslims elsewhere. It hasn’t worked yet and probably won’t for at least one fundamental reason: the Muslim world never went through an Enlightenment. It doesn’t understand what ‘liberal’ really means. Nor do the Russians nor the Chinese nor the Indians or all the Africans in Africa. All will eventually meander through the maze of intellectual gardens, being attracted and maybe following Marxist or Social Democrat or Conservative or Socialist or Fascist themes. Or they may just become authoritarian ala Russia and China today. Regardless, only a few have any true appreciation of the difficulties or the rewards of well-disciplined liberalism.

            • I have seen analyses indicating that WW1 was mostly about coal and WW2 was about oil. They were certainly part of the reason for the hostilities. I wonder, for the US, whether having an excuse to put more people to work to end the depression was part of the motivation of entering the war. Once the cheap oil was out of the ground, it helped the economy grow.

          • Roosevelt’s new deal was already petering out by 1938/9.
            Consuming energy to build stuff (roads, dams, public buildings and so on) whose prime function is to consume yet more energy is ultimately pointless. Yet it had to be done.
            Once there was something the shoot at, then consuming energy to build munitions was a better way to prosperity, but of course that could only ever be short term.

            • Chris Johnson says:

              EOM, of course you are largely correct in your relatively short analysis. Adding some context may prevent falling into the simplistic trap of designating one and only one primary reason for anything that occurs in history. Remember that US War Department’s ‘Rainbow Plans’ in the 1930s? Since Washington DC was unsure about where the threat would come from and how, they prepared — on paper and in principle — to fight England, Germany, France, the USSR, Canada, et al. Many Americans (and Brits) expressed admiration of the fascist goals and methods, while others were morally horrified by the continuing ‘White Man’s’ oppression of captive races. Lots of Americans thought the colonialist Brits were as corrupt and despicable as the nazi’s and commies, and we had war plans drawn up accordingly.

              The economic history of the period 1935 – 39 was disastrous. FDR had got his program through Congress, but watered down (sound familiar?) so that its effect did not ‘increase aggregate demand’ but merely increased stagnation. With classical economics wielded as the overwhelming argument, Keynsians could never ‘free up’ enough cash to directly feed the industrial machine, which, of course, was what the war did.

              Roosevelt’s meeting with Churchill in August 1941 on HMS The Prince of Wales had to be kept secret because FDR’s opponents would have scuttled the whole affair, or caused as much trouble as they could. Remember, this was still three months before the Japanese fleet sailed for Hawaii… In late summer 1941 Roosevelt’s detractors didn’t care about the international situation so much as they did about getting rid of FDR and gaining control of Congress. Sound familiar?

              Note that 11 months after Pearl Harbor, in November 1942, after Torch (North Africa) and Guadalcanal fighting had taken a serious toll, the opposition party (the Republicans) won control of Congress despite that the American people fully supported the war effort. In fact, if you analyze every war the US has fought since 1800, you’ll find the same effect. In 1862 the opposition won control of Congress; and in 1918; and in 1968, etc. Americans just seem to not like war for some reason… But then…

              Fear and Greed play out in all kinds of interesting and unexpected ways, and can be exceptionally counterproductive to the good of the whole.
              Cheers, CWJ

          • CWJ
            Keynesian economics depended on spending your way out of trouble, (economists today advocate exactly the same thing) but Keynes himself lived through the exact span and peak of the oil age–1880–1946. so he saw only the ‘spending’ side of things without any real grasp of what unpinned that money-value.
            He saw only the genius of industry, entrepreneurs etc, blind to the fact that oil drove the system itself. In the timespan of Keynes life, oil was effectively unlimited. So his ‘genius’ couldn’t fail as long as next years oil supply was bigger than this years and last years.
            Keynesian economics are exactly like Madoffs ponzi scheme….as long as bigger and bigger amounts of assets are sucked in at the bottom, the system cannot fail.
            When that input stops, the pyramid crashes.

          • Paul says:

            Chris: “Does the US need to continue spending gigabucks trying to resolve Middle East disputes merely to keep the oil markets stable and the product flowing?”

            I’ve spent a decent amount of time in the middle east speaking to some fairly switched on locals – and my take is somewhat different.

            The US resolves nothing in the middle east – what they do is install brutal dictators with the understanding that so long as you play ball with us and sell out your people to ensure we get a sweet deal on oil we will allow you to be wealthy beyond your wildest dreams – you can have all the blonde hookers you want – take all the drugs you want – drive your fancy cars – and shop till you drop.

            One caveat – since this is a family website and the video is more effective anyway – I link you to a scene in Scarface – http://www.youtube.com/watch?v=ugTwbS24ZAQ

            Fact. Iran’s Mossadegh did what Tony did in Scarface – he told the Brits after independence that Iran’s oil belonged to the people – BP didn’t like that so he called his CIA friends and then we got the wonderful Shah and his brutal SAVAK – and we got our cheap oil.

            In the 70’s the Saudis tried to pull a ‘Tony’ – they were more fortunate – they were allowed to stay in power but the US informed them (as any good mafiosa would) – we will protect you so long as you guarantee we get the oil (protect you from us of course haha) – and to top it off Kissinger in a stroke of genius informed the Saudis that they could keep a portion of their oil revenue (5% I believe – enough to live very large) – the rest goes into US Treasuries and to pay US companies to build things like the cavernous Riyad airport (that is mostly devoid of people). See John Perkins for more on this

            As for Sunni Shia divide I would suggest that the age old strategy of divide and conquer is what is at play here – they have not always been at each others throats http://en.wikipedia.org/wiki/Shia%E2%80%93Sunni_relations

            If you look back the Palestinians and Jews and Christians also used to co-exist quite peacefully in Palestine at one time.

            The MSM is littered with lies – it’s a bit of work to find truths – and in this case we find that the US actually fuels the middle east conflict – because this machine we have created MUST have cheap oil.

            The wars are simply the blowback that occur when you tell people that what is there’s to sell as they please – is actually not.

        • I am always deeply moved by that Kipling poem too

          • Chris Johnson says:

            Thank you, Xabier and End of More. We’re all in this together. And I agree with anyone who says that war brings out both the very best and the very worst of all of us. It’s most assuredly not the desired method of resolving disputes, and we can best hope that we’re a little smarter now than we were 20 of 100 years ago. But back then we also thought we were pretty smart, too. Gonna be a interesting time.
            Chris

          • Danny…Ultimately all wars have been over resources one way or another, Medieval wars were fought over ‘territories’ by kings who laid claim to them, but territory produces wealth from its resources, food, wool, timber, metals and so on.
            WW2 was the first real grab for resources, because of the scale involved, armies in millions rather than thousands, driven by oil in a rush to grab more oil. Roosevelt told the Japanese to back down or they got no more US oil and steel…the Japanese code of ‘honour’ couldn’t accept that, so they attacked.
            Hitler cured unemployment with a war-ready economy, which was futile without a war, so he had to attack eastern Europe and grab their resources to keep his system running. He wanted Romanian oil, (they joined him anyway) and ultimately middle eastern oil. He was told by General Todt that germany didn’t have sufficient resources to attack Russia. But like Japan, he was driven on by megalomania.
            He hadnt factored in Japan’s attack on the USA, that ultimately defeated him because Hitler was forced to declare war on the USA.
            We are all now doing the same thing, chasing vital energy resources. Hence China’s incursions into Africa and elsewhere.
            Africa was always an energy source, first for slave-muscle, (The white man gets all the blame for the slave trade, but Africans sold each other, the white man just provided the transport) then for minerals, now for oil and finally for its food—readily sold to the highest bidder by politicians who are still essentially tribal chiefs who follow the trading instincts of their forebears, selling the very existence of their fellow men to outside traders

      • Paul says:

        The US has been far more clever – they invade only as a last resort.

        Better to put in place pet lap dogs in resource rich countries – indulge them with tremendous wealth – under the Faustian pact that they agree to kowtow to American corporations allowing them to rape and pillage – at the expense of the citizens of the target country.

        Force is only required if the lap dog gets out of line.

        See John Perkins on this http://www.youtube.com/watch?v=yTbdnNgqfs8

  3. Scott Walker says:

    Hello, wanted to put this one up for our friends that are interested.
    This video is from a very close friend in California that has visited us here in our home in Oregon. He cares very much about the world and the state of our environment.

    We always talk about appreciating each day an our dear friend Chris, embraces each day clearly. He lives near the Big Sur Coast of California,. I think most of you will appreciate Chris and his efforts to improve our world..

  4. Scott Walker says:

    This article from San Francisco was out today. Seems to follow our topics very close, I wonder if the author has been on this site…
    http://www.sfgate.com/science/article/Efforts-to-curb-unbridled-growth-that-s-killing-5114760.php

    • This article takes more the Ecological Economics approach. It is sort of the “lite” approach that doesn’t offend anyone. Steady state economics, “value” on ecological services. But at least it is pointing out the issue.

      • Scott Walker says:

        Hi Gail, well that was one of the first articles in main stream media that really faced the truth, And I think more and more we will have to face the issue of the truth as that article started to do.

        That is why I put it up. It seems that many folks are seeing things more clearly in some states like California. Check our the next post I put up from my good friend in California there are many people other than us on this sight that are awake to the issues at hand..

        Kind Regards,

    • Paul says:

      Forgive me but I couldn’t bring myself to read past the first paragraph:

      “Across America, construction is up and unemployment is down. Consumers are buying. The economy is growing.”

      America’s Retail Death Rattle

      If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun. November and December retail sales account for 20% to 40% of annual retail sales for most retailers. The number of visits to retail stores has plummeted by 50% since 2010. Please note this was during a supposed economic recovery. Also note consumer spending accounts for 70% of GDP. Also note credit card debt outstanding is 7% lower than its level in 2010 and 16% below its peak in 2008. Retailers like J.C. Penney, Best Buy, Sears, Radio Shack and Barnes & Noble continue to report appalling sales and profit results, along with listings of store closings. Even the heavyweights like Wal-Mart and Target continue to report negative comp store sales. How can the government and mainstream media be reporting an economic recovery when the industry that accounts for 70% of GDP is in free fall? The answer is that 99% of America has not had an economic recovery. Only Bernanke’s 1% owner class have benefited from his QE/ZIRP induced stock market levitation.

      The entire economic recovery storyline is a sham built upon easy money funneled by the Fed to the Too Big To Trust Wall Street banks so they can use their HFT supercomputers to drive the stock market higher, buy up the millions of homes they foreclosed upon to artificially drive up home prices, and generate profits through rigging commodity, currency, and bond markets, while reducing loan loss reserves because they are free to value their toxic assets at anything they please – compliments of the spineless nerds at the FASB. GDP has been artificially propped up by the Federal government through the magic of EBT cards, SSDI for the depressed and downtrodden, never ending extensions of unemployment benefits, billions in student loans to University of Phoenix prodigies, and subprime auto loans to deadbeats from the Government Motors financing arm – Ally Financial (85% owned by you the taxpayer). The country is being kept afloat on an ocean of debt and delusional belief in the power of central bankers to steer this ship through a sea of icebergs just below the surface.
      The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions.

      http://www.zerohedge.com/news/2014-01-20/retail-death-rattle

  5. xabier says:

    Scott

    I agree.

    In January 1934, Germans were saying: ‘He can’t last much longer, it’s all such a mess, it has to end soon.’

    In 1944 they were saying the same thing: lots of people died between then and the end of the war. I think this is going to string out painfully, very slowly and painfully.

    At any moment it could tip, of course, as in 2008. But any amount of creative accounting can work wonders, and that’s what we’ve seen since then.

    Plenty of time to plant our gardens……

    • Scott Walker says:

      Hi Xabier, Good to hear from you, Yes, I agree it is a generation away or so, but it is out there and just a slow grind of decay of resource quality, quantity and availability. We are going to plant another big garden in the spring here for sure.

      Best Regards,
      Scott

      • Danny says:

        Really? Plenty of time? A generation? I think you might be right if you started the clock at 2008….but I don’t see how we could go 10 years from now at current rate….this has been said so many times here it is a cliche “declines and collapse happen very fast by there very nature. If you could keep the shale oil flowing at a faster rate than it is now for another 10 years you might be right but even that has its financial limits….If people lose confidence this time it will be hard to contain the panic and with people much “softer” today and more dependent on the system, I expect the panic to be greater. I myself was prepared for 2008 I don’t know what will happen to me if we have a bigger crash. Danny

        • xabier says:

          Collapses and disasters are very uneven in their effects and make a mockery of preparations.

          After Stalingrad had been comprehensively destroyed in one of the pivotal months-long battles of WW2, some civilians from the city still merged from the ruins at the end, having survived somehow amid tanks, flame-throwers, grenades and terrible cold. Not prepared at all for what befell them when Germany attacked, they lived.

          In contrast, the very well-prepared peasants in the villages nearby saw their homes destroyed for timber to build bunkers, their food confiscated and their winter clothes taken, negating all their preparations. They died.

          The first prerequisite is having the mindset ‘I will survive’. The second is that imponderable: Luck.

          This has to take precedence over thinking about the scale of the possible disaster.

          • SlowRider says:

            I like your example & your conclusion, although the “luck” part seems rather big in this case – many civilians were killed there, and without the strong winter, the Germans might have taken the city completely.
            I would add:
            – you have to be flexible, able to adapt to many changing situations
            – defending good health already is an aspect of long-term survival

          • The physical complexity of any large city will inevitably provide some limited resources for survival for a short period of time to fewer and fewer people as that time period gets stretched. Eventually of course everyone’s luck runs out

        • Paul says:

          The martian asked one of the few remaining humans on earth in 2020 ‘so I see all these cities that are empty – looks like some sorta collapse happened quite recently eh – what happened bud?’

          ‘Well said the earthling – there was indeed a massive, devastating collapse – and it happened in two ways – gradually, then suddenly.”

  6. Don Stewart says:

    Dear Gail and ERT
    Back to the issue of chemicals needed to make humus. The paper cited assumed that we would try to make humus with industrial methods. Therefore, instead of using bacteria which fix nitrogen, we would buy synthetic nitrogen.

    As an advocate of biological food production, I am not at all interested in buying synthetic nitrogen when I can use the services of nitrogen fixing bacteria virtually for free.

    What about the phosphorus? Here is a TED talk which assumes that industrial agriculture is the only solution we have to feed the world, but also that biological methods can be used to extend the effectiveness of mined phosphorus.

    http://www.ted.com/talks/mohamed_hijri_a_simple_solution_to_the_coming_phosphorus_crisis.html

    If you looked at the material from the North Dakota conference, you will see that they measured the fungi in the soil. More fungi is better because the fungi perform the services which the TED speaker outlines. In the native prairie, those services were free. In a biological farming system they are nearly free. The speaker says that in an industrial system they CAN be very cheap and effective. My preference, of course, is a robust biological system with a healthy soil food web delivering exactly the right amount of phosphorus to the plant and retaining the phosphorus in the soil through the mechanism of a strong Cation Exchange Capacity (which avoids the algae problem).

    If you looked at the microscopic view of the Iowa corn field, you see a dead field which is 100 percent dependent on industrial inputs. If you look at the microscopic view of the natural prairie or the biologically farmed land, you see a much richer soil food web which is capable of delivering nitrogen, carbon, oxygen, and phosphorus as well as sulfur without industrial inputs. And those ingredients are demonstrably used to build topsoil and sequester carbon.

    Now, ask the question: Have we sent so much nutrient load into the oceans that we no longer have the raw materials in the soil to make enough humus to sequester enough carbon to do the world any good? I’m not sure about the answer. For an individual farmer, I think carbon farming makes eminent sense. If everyone tries to do it, will it still work? I am looking forward to hearing from Albert Bates on the subject of carbon farming in about a month, and will try to learn what he thinks on the subject. And Courtney White’s book will be out in 6 months, and may contain some more information as a result of his research.

    Don Stewart

    • Jan Steinman says:

      “What about the phosphorus?”

      We need to resume recycling it through our bodies. Aldous Huxley noted (in Point, Counterpoint, nearly a hundred years ago):

      “With your intensive agriculture,” he went on, “you’re simply draining the soil of phosphorus. More than half of one per cent a year. Going clean out of circulation. And then the way you throw away hundreds of thousands of tons of phosphorus pentoxide in your sewage! Pouring it into the sea. And you call that progress. Your modern sewage systems!” His tone was witheringly scornful. “You ought to be putting it back where it came from. On the land.” Lord Edward shook an admonitory finger and frowned. “On the land, I tell you.”

      “Humanure” is a scary thought to most people. We think we need to send our excrement “away,” like we do our plastic waste that is now clogging the oceans. On a finite world, there is no “away.” Flushing phosphorous into sewer systems is unforgivable to future generations. Based on Huxley’s figures, we’ve flushed about half the bioavailable phosphorous away since 1928. We are very near or at “peak phosphorous,” and food yields will begin to drop soon.

      “If you looked at the microscopic view of the Iowa corn field, you see a dead field which is 100 percent dependent on industrial inputs.”

      I recently traveled corner-to-corner across the state of Washington, from Dayton (east of Walla Walla) to Poulsbo (west of Seattle). We took a lot of back roads.

      Eastern Washington looked like a war zone, like some sort of plague had hit. The wheat and corn stubble had been taken away. The hay had been mown. But it was something else: not a speck of green showed, and not a raptor graced the sky. Miles and miles and miles and miles of fields had been sprayed with glyphosate, in prep for a “clean” planting in the spring.

      Fall spraying of RoundUp should be declared a crime against life itself. When you kill all the winter weeds, you kill all the rodents and lagomorphs that hung on through the winter by eating the meagre seeds and greens left after the combines passed. Now, we’ve taken away even this, not even letting life exist on what we don’t need nor use.

      Without the small prey animals, the predators can’t feed themselves, as well. We went over 60 miles without seeing a single raptor, in an ecosystem where we’d expect to see a Red Tailed Hawk every mile or so. The only place we saw raptors were around small towns, where manicured laws provided their prey with winter food.

      Rachel Carlson’s Silent Spring is here. Now.

      We think peak oil is a problem. We think excessive debt and fiat currency is a problem. Those are trivial, compared to the warfare on the soil that modern agriculture has become.

      • That is very sad. This is probably the result of “no till” agriculture. It is supposed to be good for the field because it prevents erosion, but it kills off a lot of animals. I can’t imagine honey bees thrive in the area either.

      • Paul says:

        The makers of revolutionary products DDT and Agent Orange (dioxin) – now present Round-Up – guaranteed to kill everything that grows or moves – DEAD.

        Except for humans of course – our special formula ensures that it is completely safe for human consumption. You could even drink it (queue the fine print disclaimer)

        You can trust the Monsanto 100% guarantee on that – we have a superb track record of delivering safe reliable products.

        Get your round up today and eliminate all life from your backyard now!

    • Thanks! I am afraid we may be fairly far downhill on soil quality now.

      • Don Stewart says:

        Dear Gail
        I do suggest that those with an interest in the subject look at two videos:

        Gabe Brown
        http://www.youtube.com/watch?v=rKjX3UdVDFU

        Jill Clapperton
        http://www.youtube.com/watch?v=o6daE2sYegg

        Both these speakers are at the Quivera conference in 2012. Courtney White is an official in Quivera.

        Gabe Brown is a farmer in North Dakota. For the short version of his talk, I suggest that you look at minutes 22 to 28. You will see that his land is more productive than the conventional chemical farmers that surround him. I particularly suggest that you notice that while a soil test indicates that he has little nitrogen, he is able to grow a large crop of corn. The point is that the nitrogen is incorporated into the bodies of the soil critters and becomes available when the corn needs it.

        What we have here is an illustration of the divide between those who think growing food is all about adding chemicals to an inert substrate and those who perceive that growing food should be about feeding a healthy soil food web…and letting the soil food web supply chemicals such as nitrogen and phosphorus.

        The second video by Jill Clapperton is an introduction to the science of the soil. Her message is that if we stop killing the soil and instead promote abundant biological activity in the soil, we can produce a lot more food than we do today. In order to understand it, I think you really have to watch all of it.

        I still plan to ask Albert what he thinks on the ‘remineralization’ issue. Based on these presentations at Quivira, I think I know what Courtney will say: It is a waste of money.

        Don Stewart

  7. Pingback: Discussie tussen energie experts over ‘shale boom’ | Paradoxnl's Blog

  8. Interguru says:

    At best nuclear power will be a niche solution

    For 2008, the average worldwide generated electric power is in the order of 5 TW. [wikipedia.org]. This is estimated to increase at the rate of 2.2 percent per year [eia.gov] from 2010 to 2040 .
    This means will need to increase generation capacity by about 110 Gigawatts per year. If we generously assume that each nuclear power plant generates 1 GW, to supply all the increase from nuclear generation we will need to open a new plant about every three days. Given the immense cost, complexity and large delays associated with construction of new nuclear plants there is no way we we get close to that number.

    • Also, there are a lot of old nuclear power plants going offline, that will need to be replaced. There is the additional issue of fuel for all of the nuclear plants, new and old. We start running into uranium problems, unless we also build recycling plants and do a very good job with recycling.

    • timl2k11 says:

      3D printing of nuclear power plants to the rescue!

      (j/k)

      • Chris Johnson says:

        Great, timl2K11. But which Gen are you shooting for? The newer designs are touted as safer, but other dispute that. The newer designs use higher water temps and pressures, but are supposedly protected by some magic chilled helium. And automatic failsafes guarantee no real deep holes in the ground… Ahh, to have but a tiny portion of that R&D contract, why that would fund three generations of top notch schools and universities… At least that’s about how log the Gen III through Gen V have take so far, with almost nothing to show for it…

  9. Scott Walker says:

    Hello
    I am sending on this final paragraph from the article I posted this day. We are getting dryer in many places and it is places that grow lots of food.e long article below I just posted it says much, it is a long one an you may not have made it to the last page but here is what it says. It seems the water wells are going as dry as our oil wells will be soon.

    http://www.thecalifornian.com/article/20140104/NEWS01/301040025/With-many-California-aquifers-declining-calls-grow-more-oversight-groundwater

    “Despite the deliveries of water from the Colorado River, groundwater levels in the Coachella Valley have declined over the years as heavy pumping has drawn out water for golf courses, resorts and farms.

    Records provided earlier this year by the Desert Water Agency and the Coachella Valley Water District show that the average depth of wells fell from 104 feet in 1970 to 159 feet this year, an average loss of 55 feet.

    Across the state, water managers are increasingly trying to bank water in aquifers during wet periods to weather droughts. Depleted aquifers offer storage space, but one overarching question remains: whether California can find a long-term balance between the amounts flowing in and the amounts pumped out.”
    Scott

  10. George C says:

    There are no limits to growth.
    Resources are a direct result of available technology.
    Throw away your Adam Smith’s Wealth of Nations and get a clue!

    • Jan Steinman says:

      “Resources are a direct result of available technology.”

      I think you have that backwards. Don’t feel bad; it’s often hard to discern cause and effect when all you can see is correlation — especially true if “all you can see” is the human record since fossil sunlight.

      Technology (complexity) is a direct result of energy. Take away energy, and technology will decline.

      • Chris Johnson says:

        Jan: Is not the link between energy and technology a mutual feed back loop?

        If a closed system, then the entropy will always be rising, I think, which is what this is really all about anyway.

        Cheers, Chris

        • Jan Steinman says:

          “Is not the link between energy and technology a mutual feed back loop?”

          If you accept technology as being a form of embedded energy (HT Odum, et. al.), I don’t see how, but perhaps I’m just missing something.

          It is true that you can use embedded energy to capture and store more energy, but that is not “mutual feedback,” because there is still a precedent/antecedent relationship.

          If our technology is reduced to basic productivity — the sunlight collected by plants — the amount of sunlight falling on the Earth remains the same. If our technology somehow increases so that we can extract 200 watts per square metre over the entire Earth’s surface, the amount of sunlight falling on the Earth is still the same.

          But think of the embedded energy required to cover the entire surface of the Earth with 20% efficiency solar cells! Achieving 100% efficiency theoretically requires an infinite amount of embedded energy — clearly not possible.

          It seems to me that energy comes first. It is not possible for technology to come first, despite the hopes and assertions of technophiles.

          “If a closed system, then the entropy will always be rising…”

          At least on the time scale of the life of a species (a few hundred thousand to a few tens of millions of years), the Earth is not a closed system. Indeed, if it were, we would never have to worry about global warming, no?

          • Chris Johnson says:

            Jan: I consider technology as a means of increasing enthalpy, or work done. That can include using more energy, or using energy more efficiently, but not necessarily. What is stimulated is innovative capacities that humans, of all earthbound species, are able to enhance.
            The bronze and later the iron ages are good examples. Do bronze implements outperform stone ones? Yep. Which may enable greater (or more efficient) use / capture of energy — eg water wheels or wind mills — and thence greater mechanical innovation. It’s a ‘demand – pull’ series of events, I think. And yes, many of those systems (eg windmill) are closed systems that have increasing entropy. The entropy can only increase if new systems are developed that provide higher enthalpy.
            I’m not worried about the earth running out of energy as much as the short-sightedness of our economic and political leaders. It seems as if they all want to ‘monetize’ everything to enable cashing in (or out) at will. Being enamored with one’s navel is a major pastime: the average smart-phone owner checks mail 150 times every day…
            Chris

          • I think what happens is that we know about a potential energy source for a long time. Then someone discovers a way that the energy source can be used–say coal in a steam engine (to power a train or boat), or gasoline in an engine for a car. New devices are gradually brought to market in a series of steps that include feedback loops. Debt plays a role because without debt, it is hard for businesses to make investments in new metal mines and new fuel extraction, and it is hard for consumers to afford the new devices that are being brought to the market. Over time, improvements are made to the new devices as more of the new devices are produced. These improvements also help bring the cost of the devices down to within the price range of the common worker. It is the combination of debt, innovation, and the available energy resources that allows the fossil fuel to be extracted, and the standard of living of workers to rise.

            What we are running into now is the limits to this process. At some point, the cost of using new devices rises, because after a point, the cost of extracting fossil fuels and metals rises faster than the speed by which improvements in the devices can be made (acting to bring prices down). With the higher cost, consumers cut back on their consumption. Businesses no longer find themselves with growing economies of scale–instead they need to deal with shrinking sales and high fixed costs. Businesses find it harder and harder to raise their prices, because customers have less and less disposable income, because of the rising prices of fuels and metals, so their profits suffer. Debt defaults of both businesses and consumers become more common, adding to the problems. The standard of living of consumers starts falling, instead of rising.

            Think about what has happened to the affordability of autos. If interest rates were not very low, and loan terms very long, few would be sold.

    • Why isn’t world economic growth higher then?

      • Chris Johnson says:

        Gail, The Economist last Spring addressed the major gains in reducing global poverty that most observers thought would never happen. Instead, the percentage earning less than $2.00 per day has actually dropped from 40% to below 30%, while the number getting less than $1.00 per day (dire poverty) has dropped to around 10%. Is this merely handouts from international charities?
        The Arab Spring and violent outbursts around the world always take a toll, but global economic growth has actually improved during 2003 to 2008. What have you done to increase aggregate demand today?

        • As long as total energy consumption is increasing (and it has been up to the present, with only a dip in 2009) it is possible to raise the living standards of the lowest members of the economy. A country like China with huge energy growth is especially able to raise the living standards of a significant share of its population. Once we start hitting limits hard, this is likely to turn around.

        • Jan Steinman says:

          Wrong metric!

          Subsistence farmers can get by happily on ZERO income!

          I would say that the decimation of subsistence farming is responsible for these figures. All those people who could feed their own faces now work in factories for pennies an hour, and can no longer feed themselves. But their income has increased! Yea, pat yourself on the back, rich white people!

          Check out Schooling The World, The White Man’s Last Burden, for an eye-opening account of how the third world has been “taken out of poverty” in a way that assures most of their value goes to someone else, while they work long hours in awful conditions and live in slums.

          • xabier says:

            Jan

            Well said.

            And their land, water, air, is destroyed by polluting industries while they are slaving away.

            While in the West, the ultra-cheap and shoddy goods from Asia are used to bolster the illusion of continued prosperity, and ease the reality of rapidly declining prosperity.

            Still, I guess the welfare people I see buying them in this town have the better end of the deal, for a time: no work, but their money still stretches far enough. And it does aso help those who are working but very badly paid to clothe themselves and their families, which is no small thing I suppose.

            Without China and other cheap Asian producers it would be rags and barefoot children, as not so long ago, even with welfare.

            It’s odd that the popular film image of ‘medieval’ industry is grinding toil and suffering, whereas it’s clear that the skilled workers then were able to set their own schedules, and were apt to down tools and go off to chase women and enjoy a little wine and song when they felt like it: this was ended in the 18th century as the bosses got the upper hand and enforced the ‘working week’. The next stage was indoctrinating people to regard that slavery as a ‘virtue’ and to make people actually feel uncomfortable if they don’t stick to it.

            There’s always someone in wait to enslave you……

          • Chris Johnson says:

            Thanks Jan:
            I will assuredly read ‘Schooling The World, The White Man’s Last Burden’.
            CWJ

          • Paul says:

            Thanks for the link – and you are DEAD ON with your comments – most think the third world benefited from globalization – James Goldsmith addresses that in depth in the 5th or 6th segment of this – many in the third world opposed globalization for exactly the reasons you indicate

            We wiped out their farms with industrial farming and sent them clamoring to the cities by the many millions in search of jobs – and wages remain low because the moment anyone says calls bs I’m not working for a buck a day – the factory shifts to the next ‘Bangladesh’

            What an unholy nightmare we have created for everyone (except the few at the top of the heap and their minions – but they will not be immune – the Oxfam lifestyle will be visiting them and their families too as we descend…)

            http://www.youtube.com/watch?v=4PQrz8F0dBI

            http://www.youtube.com/watch?v=SZTzPmn-87w

            http://www.youtube.com/watch?v=A_hiEvTNV5k

            http://www.youtube.com/watch?v=yonUgZ2Y6Qs

            http://www.youtube.com/watch?v=YW6KkF6aa_A

          • Paul says:

            The documentary is online in 7 parts http://www.youtube.com/watch?v=XLSIgZWNR9M

            • Jan Steinman says:

              “The documentary is online in 7 parts http://www.youtube.com/watch?v=XLSIgZWNR9M

              Thanks for posting that, Paul.

              This film has had a huge influence on me. It exposes the lie of the “uplift” of the third-world. This is why I sometimes over-react when well-meaning people parrot IMF and WHO propaganda about how much third-world income has increased. Income is not equivalent to well-being! I am testament to that, having voluntarily reduced my income some 98% over the past 20 years.

              At this point, I believe that the third-worlders who will be best off post-oil will be the ones who never got “uplifted.”

      • Paul says:

        Gail – a couple of things – even if we were to discover a free unlimited clean energy source (as the Green Brigade prays for) — that would not solve our problems — it would hasten our demise — because that would result in larger and larger populations — and that would result in the depletion of all other resources at an accelerated pace.

        To your point on the declining spending power of the consumer — there are two headwinds – higher energy costs and deflating wages (which deflate further as so many compete for so few jobs)

        I came across this article yesterday – pretty good summary of a lot of things including the impact of high priced energy — where I disagree with this rather angry author – and I have come 180 on this – I don’t think Ben is kissing the ass of the elites — and I think they are turning a blind eye to corruption for a good reason — because they are fighting the mother of all fires here and corruption is irrelevant — growth has been dying since the turn of the century as oil spiked from 12 to 38 bucks in 2001 — and the price has kept climbing.

        No hyperbole intended — I think Bernanke knows they are fighting to delay the end of the ‘industrial age’ for as long as possible — that would explain the seemingly suicidal policies that he and other central bankers are enacting….

        “The media mouthpieces for the establishment gloss over the fact average gasoline prices in 2013 were the second highest in history. The highest average price was in 2012 and the 3rd highest average price was in 2011. These prices are 150% higher than prices in the early 2000′s. This might not matter to the likes of Jamie Dimon and Jon Corzine, but for a middle class family with two parents working and making 7.5% less than they made in 2000, it has a dramatic impact on discretionary income. The fact oil prices have risen from $25 per barrel in 2003 to $100 per barrel today has not only impacted gas prices, but utility costs, food costs, and the price of any product that needs to be transported to your local Wally World.”

        http://www.zerohedge.com/news/2014-01-20/retail-death-rattle?page=1#comment-4351024

        More people seem to be realizing that the end of cheap energy is the problem.

        I saw a clip of Marc Faber last week – he lead off with a comment that ‘you rich guys at Bloomberg don’t care but when the average person has to spend double on their fuel bills – he buys less of everything else’

        Of course it goes much further than that – the price of EVERYTHING goes up when oil prices increase (because oil is in everything and moves everything)

        But I suspect he decided keep the message simple knowing that the audience (and the presenters) would have difficulty understanding the concept – much easier to say ‘if your monthly gas bill goes from $100 to $200 and your salary remains at $2000 – what does that mean”

        Even a banker can work that out.

    • with comments like that—despair seems the only option left

    • Paul says:

      “There are no limits to growth”

      So how many people can the planet support? 20 billion? 100 billion? How about a trilion? Since it’s infinite then 100 trillion is not out of the question.

      Of course there are limits – surely the only issue is have we reached them?

      I suppose you will say that we will all be jetting off to the new earth very soon – and we can begin to rape and pillage that planet next.

      Star Trek was not real – surely you are aware of that? Warp speed does not exist.

      The thing is, real life does not generally turn out the same as a Hollywood movie ending – the hero seldom appears to save the day.

  11. cal48koho says:

    I want to again thank you for your efforts which are unique and distinguished by the breadth of your perspective. Like a good teacher you come back again and again using repetition and review as you study the problem. You also use a systems approach to the problem and a polite skepticism to new reports sprouting in the MSM poo pooing limits of any sort. Your posts are not apocalyptic as are many of your colleagues. You lay out the data as you perceive it and let the reader draw his own conclusions. One vulnerability you have not emphasized is the US offshoring of critical heavy industrial manufacturing to China, particularly machine tools.This along with the dangerous willingness to push against growing Chinese influence in Asia even threatening to augment our alliances with Taiwan, S. Korea and Japan thereby risking a military confrontation with arguably the most powerful and numerous military in the world.A destabilized Middle East certainly poses a risk to world energy supply but it pales IMO with a military confrontation with China. Disclaimer: I was a military officer during the whole of the Viet Nam conflict.

    • Thanks for your comments. I am sure you know more about the military situation than I do. A common way of deterring attention from problems at home is to start a war somewhere else. It also is a way to create jobs. I was amazed at how much the US’s per capita wages went up, once World War II started. A country can borrow money during war, when it couldn’t otherwise.

    • Chris Johnson says:

      @cal48koho
      Sir: I was a few years behind you but played in the Southeast Asian War Games (US-0, Opponents 3). The question that still has not been satisfactorily answered is whether China or Russia was our primary opponent. NVN was merely the point on their spear, despite that they were the best light infantry in the world at the time. We couldn’t have won if we’d stayed another 20 or 50 years.
      So who really did win? Answer: China, the US and the Indochina states. China because it finally shed the Soviet influence and traded it for a much more advantageous relationship with the US and the West, and which it is still exploiting. Remember that the USSR had as many forces along the Chinese border as they had in East Europe, since that’s the only way the Soviets / Russians knew how to interact with neighbors. The US also won because it now had a tacit alliance with China against the USSR that also demonstrated the failure of Marxist dogma. And Vietnam and its neighbors also won because they became independent and productive.
      So who lost? The Soviet Union, obviously, which collapsed within a decade, being financially and spiritually drained by aggressive policies all over the world and in space.
      Re China, the ‘struggle for power’ has not stopped or slowed down a bit. The Chinese leadership bases their rule on Marxist principles and ever-expanding growth, but may well have hit the end of their 25 year run. The GDP per capita average of $5,000 PPP is a great improvement, but the spreads are immense. The government fears unrest — among the poorer and the 300 million or so minority peoples. The problems and challenges are immense, which also explains why the Chinese are flexing and bullying much more than they ever did previously. Proper domestic use of foreign enemies is an old political skill in the empire. It anything, tensions will rise, as we’re now in a chess match with masters.

  12. Supposing one was to run for municipal politics: how could one fashion this concept of finite resources into a workable yet attractive election platform?

    The level of government closest to the people is municipal. So logically to bring about awareness we need municipal candidates who understand these issues and are willing to work tirelessly to promote actions that specifically deal with the concept of finite world resources: resiliency.

    • It would seem very difficult to me. If the area is sufficiently sparsely settled, I suppose one could work on trying to get enough food/ heat with local resources.

      • Paul says:

        That is an interesting point – in a sea of despair…

        The only way a small community survives (at least in my opinion) is if everyone buys into the reality that the industrial age is over – at some point the grocery stores will close for good.

        If you can convince people of that then you would have to work together to create a plan to deal with what is coming:

        – stockpile tools to be able to farm all available land
        – convert land to farming immediately
        – create a central stockpile of non-perishable goods as a back up to soften the transition
        – convince everyone that they have to pay a small tax to support all of the above and/or redirect current tax revenues towards this (clearly you have to cut services…)
        – maybe even issue a bond (who cares – nobody will have to pay it back!)
        – create a civilian militia and stockpile weapons and ammunition (the hungry will be at the gates sure enough)
        – put in place rules as to how you deal with people wanting refuge in your oasis (imagine relatives of people clamouring to get in once the storm hits…)

        In theory probably good ideas – but can you imagine if you got up at the next town council and said this is what we need to do — and we need everyone on board for it to work.

        I think it is likely you’d get laughed out of the building – the main impediment would be slowly breaking through the MSM propaganda and convincing a few people at a time — once they have their epiphanies then it might spread like wildfire.

        People know something is very very wrong — they know and fear something very very bad is coming — they just don’t understand what it is. So they might be receptive to a logical explanation.

  13. Ikonoclast says:

    Virtually all of Europe is going back into recession. This is except a few minor countries and Germany whose growth is very weak. The European economy at the end of 2013 is still smaller than it was at 2008 Q1 at the start of the Great Recession. So Europe has gone absolutely nowhere for 5 years (half a decade). It seems likely that growth in Europe has ceased forever, never to return. In other words, Europe has begun to collapse. Collapse of a huge structure is apparently slow at first. The huge scale makes collapse look like slow motion or even no motion at first. But eventually, the evidence will be apparent to all.

    China and India are competing too hard for coal and oil so Europe languishes. North America has enough of its own coal and oil supplemented with oil from the M.E. but this is only for the time being; a very short time being in historical terms one might add.

    I think we are at the peak now. Peak oil was about 2005. Various extenders are now being used; gas, tar sands, shale oil, low grade coal. Peak growth was about 2008 before the crash. Peak world production (due to overshoot) is about now or next year, say 2015. The evidence will stay ambiguous for a few years yet (to deniers) but by about 2020 I would say the evidence of collapse will be pretty much undeniable.

    How will populations react when they realise the capitalist cornucopia is a myth? I would say governments who can keep their whole population fed stand half a chance of maintaining order for some time. Elsewhere in the world, food and fuel prices will reach the point that people begin to starve (and freeze in the colder places). At that point order will progressively break down. More and more places will start to look like Syria. Certainly Egypt will go down the Syria path and the much of MENA will also do so.

    The US will have to look to its Mexican Border. Mexico will collapse well before the US and Canada. The US-Mexican border will be militarised and closed by the US as a matter of necessity. The chaos emanating from Mexico will be deadly to the southern US states if not contained and repulsed. This sounds inhumane but it is realpolitik. It is what will happen.

    • I am afraid you may be right. Also, I am not sure that the price of food needs to be high for this scenario to occur. I think the issue may be that a lot of people have no money, and governments can’t pay out benefits. So they have no way of buying food, regardless of price. In not very long, we end up with failed or overthrown governments. If oil stops flowing, then not much will be grown and brought to markets. Some people may grow their own, but there are likely to be problems with food theft.

    • edpell says:

      I think you are exactly correct. I am looking forward to the US government adopting enough of a pro-US position that it can close the borders due to over population above carrying capacity.

    • Paul says:

      I am not so sure that is how it plays out – America has a lot of farmland but it is almost all dead soil if you remove the oil and gas – based fertilizers and pesticides.

      And it takes minimum 3 years to convert back to organic methods and realize crops.

      What supreme irony we have here – massive amounts of farmland – that produces absolutely nothing without cheap oil and gas.

      Of course the government is aware of this and that is what these are for:

      http://www.forbes.com/sites/ralphbenko/2013/03/11/1-6-billion-rounds-of-ammo-for-homeland-security-its-time-for-a-national-conversation/

      (not to keep hungry Mexicans out of the US)

      • Paul says:

        Oh – and this is not a US only problem – much of the world employs industrial farming techniques.

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  15. SlowRider says:

    About this question: where did all the money go they have been printing, and why don’t we have “inflation”? Some simple but not so obvious answers tend to get overlooked.

    1) It prevented massive deflation. I am thinking primarily of what would happen if the government cannot pay its workers – massive collapse of GDP and soon the whole economy, severe depression. So every extra dollar the government (and corporations) borrow and spend to pay their workers is an illusion of wealth in the real economy. To look at nominal inflation ignores that. The continuity of BAU already IS what happened.

    2) As for the part that “did go into the real economy”, the numbers of millionaires and billionaires have exploded. You see fine art pieces traded in the double and triple digit millions – sounds like some inflation to me, but you won’t notice that in the street. Kind of a benign way to sterilize the hot money, and it won’t, can’t, flow into bread and butter.

    3) Real estate markets in European and Asian city centers have absorbed huge amounts of (mostly foreign) capital.

    4) Equity markets reflect only a small portion of the money printing. It is more a reaction to the lack of alternatives in a zero interest world.

    • Good points! Let interest rates go up, and we will see what the no QE alternative would look like. It would be a huge “Oops!

    • Paul says:

      Yes but a a great deal of that money is being given to the big banks who are parking it back with the treasury and making hay on the spread. As you point out – a great deal of it is not making it’s way into the real economy (mainly because people are tapped out and can’t/don’t want to borrow)

      And that is why we are seeing subprime car loans and other silly ideas — the hamster will stop running if credit seizes — that’s the problem with an economic system that requires infinite expansion — it won’t just stall if growth stops — it will crash into a million pieces.

      I suppose a better analogy would be to have the hamster running on a Ferris Wheel – (like that one in London) he’s running to fast he gets to the top defying gravity in the process – then he runs out of steam – and plummets to the concrete and splatters.

  16. cassandraclub says:

    The bottomline:
    It is surreal how close we can be to limits, without major media catching on to what the problem really is.

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  19. Denis Frith says:

    The natural material resources will run out because they are being irreversibly used by the technological systems of civilization.

    • I think a financial system failure is what will bring about the collapse that leads to the end of extraction. There will still be lots more left in the ground, if we could ever get our act back together sufficiently to pull it out. That is where “Peak Oil” models that assume that 50% (or 40% or 30%) of total oil consumption is left after peak are wrong.

      • Danny says:

        Yes but aren’t you underestimating war like scenarios? Look at Germany…they were able to raise huge sums of money for the war and then 10 years after the war they were able to rebuild their economy after a shambles. The same is true of japan… could we not do the same….price controls etc…countries are able to do a lot with rations.
        http://www.econlib.org/library/Enc/GermanEconomicMiracle.html

        Danny

        • Countries are able to do a lot with cheap abundant energy supplies, which was what was available after World War II. That, plus a lot of debt, helped get the economies going.

          Now, we have maxed out debt, and energy supplies are no longer cheap and abundant. The economic miracle we got before can’t happen again. We are missing the basic ingredients. We can’t print cheap energy.

          • Paul says:

            EXACTLY!

            An industrial economy like we have lives and dies depending on the availability of cheap oil.

            The cheap oil has been burned up

        • Chris Johnson says:

          Danny, the elimination of fascism in 1945 left a bipolar world whose hegemons competed to the death. Had Truman not instituted The Marshall Plan and confronted Stalin on all (or almost all) fronts, there is little doubt that Soviet liberation forces would not have stopped. Resuscitating Germany, and competing against active and successful Communist political parties in much of Europe, was feared by those who had already watched the transformation of Eastern Europe.
          A permanently divided Germany was acceptable to all parties for obvious reasons. In fact, in the early 1990s many Europeans were quite fearful of a reunited Germany. By now, however, we can all agree generally with Zbigniew Brzezinski is ‘competing to become the world’s most comfortable retirement home..’ Which raises the question: why does Europe, and Germany in particular, now prefer nannydom?

  20. Scott Walker says:

    Hello, We just cannot imagine all of the trillions of dollars printed since the 2000’s over the last 13 ten or so years. Let us not fool ourselves it is it out there the they plan to lend it out again like we saw in the 1990’s.

    It is easier to inflate than to deflate which is political failure to most in politics. Inflation will be the easy path out for a short time but our crisis still looms later after the inflation.

    I think we all see the problem coming but we are just a bit early as things will creep along as they are now for a time to come, how long? Perhaps 5-10 years or your guess is as good a mine, so no collapse just yet just bit of torture first we will have to endure inflation and then the dreaded deflation – Which is worse, I really think they are both bad as we need a stable economy and financial system to wake up in the morning not to see the prices changing.

    This will be challenging for us all I believe.

    Regards,

    Scott

    • Paul says:

      I would very much like if we could bump along the bottom for 5 or 10 years but I simply don’t see how.

      Let’s take China for instance – they have printed 15 trillion dollars since 08 (yes you read that correctly – Zero Hedge exposed that and it went into the MSM a few weeks after)

      What did they do with that printed cash? Many useless things that return 0 including building many ghost towns (anyone who travels to china can look at these – they are everywhere) – basically because their export driven economy was not exporting so much after 08 they decided to build stuff.

      People say ‘but china needs this because so many people are moving from the villages to the cities’ – if that is so then why weren’t they building like this pre 08? Almost all of the people moving from the villages are uneducated and unskilled – they will not be renting 250k condos in the city (well maybe at some point the owners will but them up into dorms and put 10 families in each unit heheh)

      So of course when you over-build you end up with a glut when there is no ROI — and the banks who loaned the money end up with a lot of bad loans – and when you hear about the credit crunch in China every few months what is happening is that the Chinese banks in huge trouble (think AIG – Lehaman). They have massive books of non-performing loans – if allowed to default the Chinese banking system would collapse.

      And you know what the solution to that is? Best you sit down and let that Xanax take effect………………

      Ok so here’s the punchline — the PBOC injects billions of more money into the banks — and the banks make even bigger loans to bankrupt entities that are holding these ‘assets’ that are returning nothing — the entities use those loans to service their debts.

      The PBOC of course knows this is insanity — and threatens to cut the funds off — but they are stuck — you throw good money after bad or you collapse.

      Spain is doing the same thing with there banks — the US is playing similar games giving money to banks at zrip and getting them to buy up foreclosed houses so as to inflate the value of their loan books on underwater properties so that they are no longer insolvent if they mark to market.

      All total madness.

      Surely none of this can go on for 5 years – I just don’t see how they can keep sticking their fingers in the dyke that long with new holes busting threw everyday.

      We are getting to the point where we are pushing on a string with QE – the consumer economy is starting to wilt — Christmas sales were atrocious and big retailers are bleeding badly – that means more layoffs – which further crushes demand for ‘stuff’ – this is a death spiral.

      Oil went from 12 bucks in 98 to 38 in 2001 – and that is the genesis of all of this – and that is when the government and Fed started on this suicidal path of easy money – they were trying to fight the recessionary effects of high energy costs.

      I would very surprised if this goes on for more than two years. I think there is a 50-50 chance that we get a Black Swan this year — resulting in the mother of all collapses.

  21. Sandy Andysay says:

    Folksy Bank Teller: Hello, this is the Folksy Bank.

    Customer: Hi, I’m calling about my checking acount.

    Folksy Bank Teller: Yes. How may I help you?

    Customer: It’s about an overdraft notice that just came in the mail. But I can’t be overdrawn; I still have checks left!

  22. Interguru says:

    Tom Murphy in his blog Do The Math has a semi tongue-in-cheek article on the finite world vs infinite economic models entitled “Exponential Economist Meets Finite Physicist”

    http://physics.ucsd.edu/do-the-math/2012/04/economist-meets-physicist/

    Here is the opening portion
    —————————————————
    Act One: Bread and Butter
    Physicist: Hi, I’m Tom. I’m a physicist.

    Economist: Hi Tom, I’m [ahem..cough]. I’m an economist.

    Physicist: Hey, that’s great. I’ve been thinking a bit about growth and want to run an idea by you. I claim that economic growth cannot continue indefinitely.

    Economist: [chokes on bread crumb] Did I hear you right? Did you say that growth can not continue forever?
    —————————————————

    He makes the same points as Gail does but with a lighter tiuch

    • He makes some very good points about a number of subjects: efficiency growth being limited, the fact that economic growth cannot continue without energy growth indefinitely, and the fact that eventually heat gets to be a problem, with to much growth. He doesn’t get into the problem of limits being perhaps close at hand.

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  24. Gail, an excellent post as always.
    It does not bode well for the future. I am reminded of what Michael Ruppert stated in his documentary Collapse: “You have finite energy and you have a financial paradigm which demands infinite growth and we are at a point in human history where the infinite growth paradigm collides with something that is more powerful than money is.”
    As far as the media goes, I have to say that my conspiracy theorist hat comes on for this and I think of how Charles Hugh-Smith approaches the issue: Qui Bono. The corporate media is run by the elite who have a huge stake in the status quo continuing. It has been almost solely up to the independent journalists and bloggers to show the emperor has no clothes.
    As for the future, I also defer to Michael Ruppert in Collapse when he states: “The people who have run the planet to this point and are running the planet now are losing control. What I see is a new paradigm that is as cataclysmic as the asteroid event that killed almost all life on the planet and certainly the dinosaurs. We may be seven billion people by the time anyone sees this interview. All of those people exist, are on this planet only because of oil. That’s it. So it’s axiomatic that if you take the oil away, the population must go away also. Certain things are inevitable right now. FDIC insolvency I will tell you is coming. Insolvency of the Federal Reserve is coming. The Federal Reserve can go bankrupt. T-Bill defaults. We’re looking at major bankruptcies, starvation, dislocation, all these things are already on the way. Everything is going to breakdown.”
    As I’m reading The Fourth Turning currently, the timing of all this couldn’t be worse. Happy New Year!

    • The government certainly has guaranteed a lot of things–bank accounts, pensions, loans for nuclear power plants. When a person adds those obligations to all of the formal debt obligations the government has, a person has a hard time seeing how things can come out well. After all, the things we can purchase in a given year are mostly those things made in that year. If the amount we can produce goes way down, the amount of goods each person gets needs to go way down as well.

      • Scott Walker says:

        Hello, Yes the Governments of the world have promised more than they can pay and those that can inflate or print new money to pay for these promises will likely see inflation in their countries as a result of this action. The US Dollar and the Euro are at the helm of this event. Either inflate or die, but in the end we will likely see some sort of collapse, like we have all been talking about for some time, but this is not going to happen fast, no one including me wants to see this but it is out there looming someday…
        I am in no hurry to see this,

        I wish we had a more stable system, but it seems that we do not.

        Scott

      • Scott Walker says:

        Yes, it is true the holders of the world reserve currencies, the US Dollar and Euro and Asian Currencies can inflate and hold off that dreaded deflation we talked about for quite a bit longer it seems to me.

        The Bond markets and stocks could take a big hit any time, but the central bankers would very quickly enact the “pre-canned” monetary responses that would be inflationary, it is easier to fight deflation than inflation if you own a money printing press.
        Likely the money could go to the bankers as we saw in recent years, but they could also send a large check to each taxpaying citizen if they so desired.

        Eventually they will loose control such as Rome did but this game can go on for perhaps another 20-30 years or so, I make a case for inflation because costs to extract much keep up with the real cost or we will see things discontinue.

        We see a world right now that has not just yet seen the up coming problem of resource scarcity. I give this some time and no in a hurry to see it but it looms.

        Scott

        • Danny says:

          20-30 years? No way! Unless you find the type of oil that S.A has……without cheap oil the game will change…..printing press or not…..I think BAU 20 to 30 years is naive….

    • edpell says:

      Maybe it is like Easter Island. Maybe society will be unable to change.

      Ideally all will take part of the cuts. Less social security, less military, less corporate welfare, less Israeli welfare, less farm subsidies, less interest payments (yes, short change the bankers), less federal pension payments, less medicare and medicaid and less ADA, etc….

      • Interest payments are used to fund pension plans. I am not sure whether you would be shortchanging bankers or your mother’s pension plan. Families will need to help out their relatives financially more, if government doesn’t do this.

        • Scott Walker says:

          Hello Gail, Yes a good point, families will really have to take care of their relatives in the years ahead. It does look like they are trying to expand gov health care like Obama Care, it may last for just a few years then it is just us. We will be all on our own soon which will be life threatening situation for many.

          Scott

        • Scott Walker says:

          Hi Gail and all, I think if you are fortunate enough to live in a small town or suburb. It is good to shop local when possible save gas and support “The Village Type Town” if you have one. I have paid a bit more to shop local, but have made friends and acquaintances that are more important.

          So when possible we try to shop shop local to support our town, but if you live in a small town and you have to make those monthly trips, we use a like a gas tiny car and load it up with food we try to do the trips only once a month to save fuel and the environment.

          I was thinking about electric cars, they would work great for me as long as I could at least 150 miles per charge, but I think they would work best on vehicles that now burn diesel in small towns, for example Garbage and mail trucks, that stop and start would benefit from the power regenerating brakes that charge the batteries each time they hit the brakes. Garbage trucks and mail trucks and delivery trucks always start and stop and these electric fleets in smaller towns or suburbs would be a good start. The Prius electric car actually charges the batteries when you hit the brakes. So these utility type vehicles will be out soon I think.

          Not much help as as the diesel is being burned on the highways, there we need more trains and less trucks (sorry truckers).

          Now the problem, these electric service vehicles will be great in small communities but the power needs to be made with something other oil and gas, coal etc. Looks like nuclear thorium reactors, or small stations of the old type currently being used standard nuclear plants but very small and portable, but still dangerous. But we have the ability to make clean electric easier than clean liquid fuels.

          So I think the mail truck and many city service vehicles should go electric now. The work during the day and can charge at night. As much as we dislike nuclear it is best option if we go with Thorium and the newer technology. We need to save what fossil fuels are left for making other things like plastics etc.

          I think this will be a trend in the next five years. especially if the price rises on gas or if shortages develop.

          I think Gail warned if the price of gas falls it would actually be bad as it would put into shortages and cut money to build projects that I just discussed, interesting issue.

          Kind Regards,

          Scott

      • xabier says:

        In Britain and Spain, the only countries I know well, the new pattern is: pay the same or higher taxes, but get less back from the state, much less. This seems to be happening elsewhere, too.

        This can be strung out for a long time: the suffering is hidden (the hungry, the badly educated, those who die or are crippled without prompt medical treatment – not really visible fromday to day are they?) and when all the parties have the same basic programme, it’s electorally neutral.

        The structures remain, it simply all gets hollowed out: education, healthcare, housing, unemployment benefits and pensions.

        • I can believe that is happening. The other thing I expect to happen in the US is the federal government taking programs, and turning them back to the states without funding. If the programs don’t get funded at the state level, then it isn’t the federal government’s fault.

    • Paul says:

      Thanks for the reference – I am pulling that down to watch on a long flight tomorrow.

      And I agree with your comments – anyone who thinks this will be anything but dire is living in a delusional world.

  25. Scott Walker says:

    Hello Gail and Everyone, Thanks to you the picture keeps getting clearer. That Egypt Chart troubles me – as I think it is a template that for charts of other countries, all of our exporters not exporting anymore — because of their own growing population they will be holding on to their oil gas and coal. And, talking about coal, that China chart of coal usage was also disturbing to me as we see CO2 over 400 PPM.

    Although these shortages in oil gas and goods loom and we can see it coming from the data,

    However, for now in the next few years – I believe that we are in an – in between point, a plateau.

    A time that politicians and world bankers still have the upper hand and since we are at kind of on a plateau and during this time – the large governments and Agencies like the Fed can actually do many things to keep the balls rolling for now.

    I make a case for inflation because…

    Trillions of excess reserves still sit in the Banks vaults of (not yet lended out), the central bankers of the world, this money is yet to be lent and therefore, we have not seen the inflation that many (including me) expected. That is the key the inflation has not happened because the cash is sitting in bank vaults, but it does now exist.

    This money has not yet entered our system but lies dormant waiting to be lent out and put into the system. And, if this is not enough many countries could mail a check like George Bush did, but it could be for any amount they wanted.

    For this reason I believe we will first see inflation rather than deflation. Prices will rise and it will surely make things harder along with less jobs but some jobs being created with the money pouring into federal and government jobs, contracts etc.

    We are not just there yet to the time of recognized shortages of fuel, metals and other finite resources. I still argue that they will first put us through inflation, perhaps even hyper inflation before deflation and general collapse and decline, but over the next 10-20 years or ? your guess is as good as mine, I am always amazed at how long they can keep all the balls in the air like a jugular. Here is something I was looking at today link below,

    So I think we will see inflation before deflation.

    Kind Regards to all in this new year 2014!
    Scott

    http://www.reuters.com/article/2014/01/03/us-usa-fed-plosser-idUSBREA020N520140103

    • donsailorman says:

      Scott,
      I agree that we will see inflation rather than deflation. Why? Because of politics. Republicans love to cut taxes (especially on the wealthy) and to spend more on the military industrial complex. Democrats want to spend much more on social programs–such as Obamacare. Thus there are powerful pressures to run bigger and bigger deficits, especially in times of high and rising unemployment. To finance deficits of two or three or more trillion dollars a year will require much more quantitative easing by the Fed.

      One quibble: Almost all excess reserves held by U.S. banks are not in vault cash but are on deposit at Federal Reserve Banks; these deposits earn only a quarter of one percent interest for the commercial banks, but it is risk free income. Currently excess reserves are about two and a half trillion dollars–very different from the 2007-08 time.

      Whether we get to hyperinflation is primarily a political question. The Fed will fight against hyperinflation, but if unemployment went up to say 20% I think the Fed would permit inflation of perhaps 10% per year–which would cut the value of the dollar in half in just seven years and a couple of months. Inflation inevitably results from huge and increasing deficit spending by national governments. For the moment, the U.S. deficit is decreasing in response to some (not much) recovery from the recent recession. If real GDP increases about 3% during 2014, then the deficit will probably also shrink some more during the upcoming year.

      I expect stagnation in real GDP followed by another recession within three or four years for the U.S. Real growth is about over. Nominal growth is unlimited in potential because there is no upper limit to inflation. Note that unanticipated inflation benefits debtors, and there are a lot more debtors than there are creditors. In the short run (but not the long run) there is a tradeoff between inflation and unemployment, and that is why I think a big increase in unemployment is prerequisite to much increased inflation in the U.S.

      • Scott Walker says:

        Hello donsailorman and others, Good point, where is all the money that the Fed and other Central Banks since say 2008? I would guess it is in many vaults, not only in the US but in it allies vaults. This a a world wide inflation event from my view. Many Banks holding excess money from the zero interest rates they were able to acquire and so called re-capitalize assets. The truth is we have a lot of money that is yet to be lent and they are ready to do this,inflation will come first then we will have to worry about deflation.

        The president of any country could mail each of us a check for any amount and the inflation would become real, The are how ever doing this through other means but worse came to worse we could all get a $5000 check in the mail and all would be good for a short time before the inflation sank in. Who ever spent the money first would be ahead of the game.

        Just my ten cents.

        Scott.

    • Who is going to borrow all of this money? What collateral are they going to use? Workers need to prove that they have salaries to cover loans. Businesses need business plans, or assets that can be sold in the future to justify their borrowing.

      • Scott Walker says:

        Hi Gail you asked about who is going to borrow this money to create the inflation? Well I believe the central banks keep creating fiat currencies that have no backing, no collateral like gold and oil backing it, and it will work for a time, but not that much longer, perhaps a generation or just years, I continue to be surprised just how long these things can go on.

        I think it will be inflationary at first for the west and perhaps other countries like China who have been acquiring tons of gold, and oil resources etc. their currencies like the yen that have more backing will become more valuable in time, but right now the USA and Euro Zone are kind of both somewhat reserve currencies of the world are wielding their mighty swords and printing and trying to inflate.

        In my opinion and others, these types of actions have created danger and threaton the USD to remain the world reserve currency and their actions to destabilize the dollar look intentional to me, starting with after JFK died, no more silver coins in our money and even ealier when the Fed was established in 1913, things just went downhill since then for the USA.

        The USD most recognized world reserve currency will likely inflate before it deflates due to its world reserve currency status. Other countries that are in the Euro zone are not able to print at will but instead beg for handouts from the central bankers and IMF.

        But in the end countries that have their currencies backed by resources, gold oil, water, food, livestock farms etc. will be most valuable other than owning the resources themselves outright. China seems to have done a better job at grabbing world resources than the west it seems to me.

        It seems like more liquidity chasing fewer resources equals higher costs in near future.

        Scott

        • Interguru says:

          Stein’s Law: Things that can’t go on forever eventually stop.

          Two corollaries ( mine )
          It goes on longer than you think it can.
          It stops suddenly without warning

        • Danny says:

          Didn’t we start to get a taste of inflation in 2005-2008….price of oil rises super high crash happens and we start all over again. Wash, rinse, repeat.

          • I think it has taken money printing to get the price of oil to rise as high as it has again. Now it is not really rising high enough, even with money printing.

    • Ert says:

      @Scott

      With the coming deterioration all the equity, companies, houses, etc.will lose value. Real income an salaries will also go down.

      The question is: Will they cover over all bad debt with fresh liquidity? FDIC for everyone? or will someone take the hit?

      If they cover it allover: Inflation. Because ever more money bids on ever less economic value. If someone will take the hit: Deflation.

      What do I think?

      Little man will take the hit, Big banks and big money gehts the cover – so they can collect all the rest of the stuff for cheap. This also make the little man much more controllable. And then all breaks down.

      • Scott Walker says:

        Hello, I agree 1 percent will get richer, I have a friend who is a Lemo Driver in California and he has been busier in recent years.

        I think the Fed and Central banks will continue to “paper over” things with liquidity and they seem hell bent on avoiding deflation. They (central bankers) are following Keynesian economic policies which are inflationary in my view. They believe that they can avoid another 1930 style depression.

        http://en.wikipedia.org/wiki/Keynesian_economics

        Just look how they pushed up the stocks with the money printing, this seems to be set to continue. Big business will keep getting bigger and more and more people will work at lower paid jobs like Walmart.

        If we have a market crash either in stocks or bonds or both look for a new even larger stimulus package. The president could send out checks just like Bush did and they can write that check for any amount they want, that would put money into the hands of public and would be inflationary. We have not yet experienced the heavy inflation because since the 2008 downturn the banks have recapitalized but most of the money in their vaults has yet to be lent out.

        I still believe we will see first inflation perhaps even hyper and then a deflationary event that may get out of hand.

        Their are surely two forces at work here deflation and inflation, my bet is still on an inflationary future, more money chasing fewer resources is inflationary to me.

        On a separate issue I wanted to share this article I read about water and finite that is in many areas now.

        http://www.thecalifornian.com/article/20140104/NEWS01/301040025/With-many-California-aquifers-declining-calls-grow-more-oversight-groundwater

        Kind Regards,
        Scott

        • Ert says:

          @Scott

          We will see how the financial system will be managed – I view it more an more as a lesser concern. If the interesting times we see will come, the money has to be aligned with the available assets, either through inflation or deflation. Whats the difference for most have-not’s in the end?

          But global soil quality is more problematic is even as critical as water….

          http://www.upi.com/Science_News/2013/11/04/Researchers-World-ignores-soil-quality-at-its-peril-may-be-at-risk/UPI-99581383610212/: “While the high use of fertilizers, irrigation and plowing provides a false sense of security, about 1 percent of global land area is degraded every year, the Scholeses said.”

          http://www.wamis.org/agm/meetings/rsama08/S301-Lal-Climate_Change_and_Soil-Quality.pdf“Climate Change • Projected climate change may exacerbate the problem of desertification, drought and soil degradation. • It is essential to identify and implement coping (mitigation) and adaptive strategies. and “Other Soil Related Constraints In South Asia • Low AWC (Available Water Capacity) in rainfed soils • Poor quality soils • Depleted of nutrients and SOC (Soil Organic Carbons) • Extractive farming

          The second one is quite good in summarizing the key factors.

          • Scott Walker says:

            Hello, Yes I a too am more worried about our Mother Earth than the financial systems of the world as financial systems, they have come and gone of history.

            On the environment and water etc. Bad signs everywhere we look, it is especially disturbing to me to see the state of our fisheries, corral, and timberlands and jungles etc. overpopulation combined with greed.

            Seems to be our recipe for our future with less quality, quantity and availability of things many generations that came before us basically took for granted.

            Looks like a slow way down but hopefully we can change, not too encouraging for our grandchildren to look at if they even understood it.

            Kind regards,

            Scott

    • Paul says:

      I agree – hyperinflation then deflation.

      I look at this plateau as a time to prepare. My wife says why bother – and she might be right – but when things unravel our survival instinct will kick in and anything we have done in advance will be valued at some point.

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  30. MG says:

    I was thinking about the fate of religions, especially Christianity, on the downslope. There is this notion of “sin”, which, in other words, is “debt”. The sinner in fact is the indebted person. There is the person of Christ who frees from sins (i. e. frees from debts). But the world with limits, with the depleting resources, can not be saved simply by forgiving sins (i. e. relieving from the debts). Many Christian believers today accept the lifestyle of indebted persons of our era as something which is normal and standard. The current situation, where the people loose faith in the religious teachings of Christianity, reflects this phenomenon. They encounter “badly indebted” (i. e. mortally sinful) believers in their communities more and more often and are witnesses and victims of their asocial behaviour. I think that the Christianity does not take into account the resource depletion reality. The Bible does not contain such notions. That is why the Christianity is badly hit by the societal collapse, i.e. crime, divorce, prostitution, drugs etc. within its communities. The Christian ethics can not function under harsh life conditions. Especially the Catholicism is seriously affected by the population decline: its modernist view of Christianity as life and family protection can not compete with the medieval (and coming) era of barbarism and asceticism. The Christianity of the 20th century can not survive…

    • dolph says:

      Yeah I think Christianity will survive the collapse and perhaps a few centuries after that but then it’s over. It will be associated too strongly with the bankruptcy of the industrial, scientific world and the failure of America, modern medicine, the ethics of abundance and “be fruitful and multiply.”

      Still, I think in the short term it’s useful to embrace the religious aspects of Christianity as a defense against collapse.

      • Chris Johnson says:

        Dolph, you might want to reconsider, based on the new Pope’s approach to materialism and wealth distribution, etc. Those tenets are very strong in Christian and Hebrew fundamentals, but were downplayed in the last Century as churches tried to stay relevant to their affluent, educated flocks. It turns out that Pope Francis has had some impact not only with the Catholic Church, but also with non-catholics. How much and how long it will last? Have to ask Yogi Berra about that.

        • Sandy Andysay says:

          There have been a few references to Yogi Berra in the last few days and many references to Climate Change. I think that Climate Change will be monumentally challenging and it will be quite tough to avoid runaway global warming that may well toast the majority of species before the end of this century. And it might be wise to ask Yogi directly for some of his sage advice on the topic while he still (hopefully) has most of his marbles. Yogi will turn 89 in May and I certainly wish him well. But for now, I offer a paraphrase of a story I heard a few years ago.

          Yogi Berra was a talented catcher for the N.Y. Yankees and after retirement as a player he went on to manage the Yankees. One hot summer day the mayor of NYC declared a special day in Yogi’s honor to celebrate his accomplishments as a player and manager and give him the key to the city. While Yogi was waiting for the ceremony to begin, there was a glitch in the public address system and it took quite awhile to get it resolved. The mayor was over attending to that, but the mayor’s wife was sitting next to Yogi on the stage and engaged in small talk to pass the time.

          The mayor’s wife said, “Well Yogi, you sure are cool, calm, and collected, even in this scorching heat.”

          To that Yogi replied, “Yeah, thanks, and you don’t look so hot yourself.”

        • xabier says:

          Pope Francis has the makings of a great man. He’s sending shock waves through the traditional Catholic community in Spain. The Left loathe him too.

          Authentic Christanity – who would have thought it?

          Saludos.

          • Chris Johnson says:

            Concur, amigo. He almost talks as if his script writers were Matthew, Mark, Luke and John.

            Saludos y gracias. Chris

      • Paul says:

        Maybe there will be a second coming and we will all be saved 🙂

    • I am not sure religion is a big a problem as you indicate. Religions morph and change. There are many different religions that claim to use the Bible as their basis. Religious people believe very different things–many of them contradictory to the literal words of the Bible.

      People need a common set of beliefs that can be passed down, and religions give these. It is difficult when we are at a stage of transition, because then the beliefs we had in the past work a lot less well. Having lots of children was important when most children were dying young of diseases–it is obviously counterproductive now.

      In recent years, in the US we seem to have developed a quasi-religion around such beliefs as “He who dies with the most toys wins.” “Ben Bernanke can save the economy.” “Growth is good; more debt is good if it enables growth.” “We can live almost forever with enough medical treatment.” This religion is counter-productive too.

      Hopefully, new versions of religions will emerge that emphasize other ways of acting–being happy with less; learning to let go of loved ones, rather than spending incredible amounts to attempt to keep them alive in poor health.

      • Jan Steinman says:

        “Having lots of children was important when most children were dying young of diseases–it is obviously counterproductive now.”

        That may be a short term trend.

        Over 99.9% of humanity’s existence, children have been both a slave labour force and a retirement plan. Even the “Limits to Growth” graphs show the birthrate shooting up as other resources decline.

        I don’t want to believe this, but it’s a possibility we should keep in mind.

        No matter what religion we profess, almost all seven billion of us worship at the church of growth, including anyone here who pays into or draws from a retirement plan.

        Being childless, my retirement plan consists of coming up with lots of ways to be seen as useful to young people. 🙂

        • Ert says:

          @Jan

          Yes – the selfishness in having (lots of) kids is a big problem. Kids are often not born for the sake of the kids, but for the comport of the parents. This is o.k. if it is managed in a sustainable way – but not with exponential overproduction as we have done as species.

        • I was surprised to find that North Korea’s population continued to grow, in spite of the famine they experienced, suggesting that their birth rate didn’t drop as much as it needed to.

        • Paul says:

          As usual some excellent comments throughout Jan. I’ve also made a conscious choice not to have children. As a friend of mine who has done same puts it when asked how can he and his wife remain childless ‘there are enough people on the earth already’

      • MG says:

        I see that the Christianity faces (will face) a big problem of funding buildings, priests, various activities, even in the era of helping the poor, etc. It is hard for the Christian churches to accept the fact that they can not sustain such religous life as before. The rising number of the individual people fighting for their rights (looking like the fight for the rights of homosexuals, gender equality etc.) is not correctly understood as a part of the coming population decline. The problem is, that there are people within the churches who still believe, that Jesus is a kind of technological guru, who can save the planet. People who do not understand that we must return to the concept of a clan, larger family. The modern family is dead.

        Cheap and abundant energy of the fosil fuel era drammatically influenced the Christianity and its view of the life on the Earth. The coal and the oil acted like fuels for miracles, creating a totally new world, ressurecting the past. (Energy is an important element of religions. It is no coincidence that Jesus, the saints etc. are depicted as energy sources – radiating aureole, rays etc.)

        The problem of the Christianity is that it must get much simpler. Concentrate on the afterlife teachings. Furthermore, e. g. the Catholic Church had social function in the medieval era which can not be restored in the world with the depleting resources easily, replacing the role of the social state. You are totally right: problems like bioethics will become unimportant. Many people “made of coal, oil or natural gas” will die, when the flow of the energy from these sources stops.

        Anyway, I am very sceptical about the future of the Christianity due to its rich history, which can function as a burden into the future. It is hard for many people to stop believing in the historism of the 19. century, that allowed reviving the past with the help of the cheap and abundant energy (archeeology, historic buildings restoration etc.).

        Historism is dead. We will not have enough energy to revive the past. All the stuff created and revived by the era of the cheap and abundant energy will look like an unplugged device rotting somewhere under the bare sky.

        • edpell says:

          There is a diversity of world views in religious communities just like in none religious communities. Some will be adaptive in the new world and some will not.

          Ed member religious society of friends

        • I know some churches have a lot of unfunded pension liabilities. Even ones that supposedly have pension funds well-invested will run into problems if stock and bond prices decline. These are likely to be a problem, especially if financial capability declines.

          I also know that attendance and giving at Christian Churches is down. I expect that part of this relates to lack of disposable income–why dress up and use gasoline, when one can stay at home more cheaply? Also, a feeling that the message is not very relevant to today’s world. After all, the Federal Reserve will save us all.

          Going forward, I think churches (Christian or otherwise) are likely to still play a role. People will be very disappointed to see the government and system that had worked for so long failing, and will need some place to gather and talk to others. Churches are good places to finding like-minded people to work together with. And, as you say, there can be a belief that things will be better after death–something that may be helpful if things are truly bad here on earth.

          Back in the days before health insurance, “Lodges” played a bigger role, contracting with physicians to provide health insurance for their members. That may be another type of organization that could again grow.

    • SlowRider says:

      Religions are traditions and rituals. If what we look for is a personal relationship with the Spirit, religion can even be an obstacle, because it leaves us with the IDEA of having that, instead of the real thing.

      • Chris Johnson says:

        That’s a good Buddhist concept that can apply, but is not necessarily definitive. Weighing all the positives and negatives, both the potential and the actual, is a challenge that yields more accurate understanding and better predictions. One of the most important benefits is the effect of forgiveness, without which societies can be easily shredded.

  31. Hi Gail, thanks for the post, i really need your help on one thing I can’t get my head around. It has to do with your reason nr 5 in the post. I got a question from a friend on why investing a larger part of our income and energy supply to produce more energy is worse for the economy and society than using that energy and money to produce say plastic toys or larger TVs.

    Say for example that all the states of the world united to start investing heavily in mixed types of renewables, say they finance it with printing fiat money. I guess that would drive up energy prices and destroy a lot of demand for various products since customers and the manufacturers can’t afford the higher energy price. We would not be able to consume as much stuff as before since the energy needed goes to investing in new energy. But at the same time the renewable energy sector soars and employees massive amounts of people in production, sales, installation, maintenance, transportation etc. These people of course pay tax and spends their salaries, contributing to the economy.
    Today a lot of our energy and money goes into stuff we don’t really need, like plastic crap toys, yet another electric machine for your kitchen etc. If we forced these resources to be used in production of renewables instead, how exactly would that push us into collapse?

    I’ve been trying to answer this myself but with meager result. Half of the time I think the question is silly and simple, the other half I think it’s really, really difficult. Any help is great appreciated.

    • There seem to be several areas of confusion in your comment:

      1. What printing money does: Printing money can lower interest rates. It can raise prices of investments like stocks, bonds, homes, and farms. If the government sends out checks to individual citizens, it can get the money to individual citizens, but this happens pretty rarely. It doesn’t give us the money to invest in renewables or for that matter anything else. Perhaps you are thinking about the government taking on a debt, to finance renewable energy. In this case, it is in effect, trying to gain access to all of the goods and services required to make renewables (metals, concrete, rare earth minerals, oil used in transportation, for example) by promising, in the future, to pay an amount each year plus interest, based on the additional income the renewables hopefully will add to government coffers. These metals, rare earth minerals, and oil, are then not available for other purposes.

      2. A second source of confusion is what renewables are, and what we are trying to substitute for what. There are really two primary ways we use energy: (1) As oil products, and (2) as electricity. We have a real shortage of oil products, and this is a major area where prices are rising. The increase in oil costs are spilling over into other areas as well, including metals’ production, coal and gas extraction, and even food production and transport. Unfortunately, we don’t have a good way of fixing this problem with renewables. We can make ethanol, by using huge portions of farmland, and pumping our aquifers dry, but we have about maxed out this approach already. So when people talk about increasing “renewables,” they generally are not talking about fixing our (huge) oil problem.

      Instead, the renewables discussion has mostly to do with the fixing the second item above, electricity. The reason given for adding renewables is usually given as climate change. I think that in Europe this is a cover-up–the real concern is that natural gas supplies are expensive and running low. Wind turbines and solar PV are both ways of producing electricity, as is “wave energy, “biogas” and other exotic forms of energy.

      So when all is said and done, adding “renewables” still leaves us with our oil problem. What it mostly does is make electricity more expensive. This can be disguised with subsidies, but the problem just morphs from one place to another–say higher taxes, reducing spendable income. Higher electricity costs means that products made by the country with renewables will tend to be more expensive than products made elsewhere in the world that do not use renewables as a source of electricity. As a result, they are less competitive in the world marketplace. The net result is the number of jobs available drops in the country using the renewables, making it harder to pay back the debt, not easier. So the government is more likely to default on its (growing) debt.

      3. What really happens with “renewables” is that the cost of your electricity jumps. The cost of oil products may jump as well, if the cost of extracting them from the ground jumps. But your salary doesn’t jump. In fact, there is a higher chance that you will be laid off, because of the competitiveness problem with the higher electricity prices. You are faced with having to cut back in discretionary spending, because of the higher oil and electricity prices. Your cutback in discretionary spending means that workers in discretionary areas (vacations, restaurants, new home building) tend to get laid off as well, raising the unemployment rate further.

      4. One thing that makes the whole situation a farce is the fact that the CO2 savings from “renewables” is speculative at best. It is not easy to measure all of the energy going into the process, because part of the energy is needed to balance intermittency, part of it is embedded in the salaries paid to the workers, part of it goes into the interest paid on the debt (and what that interest is used to purchase) and part of it is the actual direct energy on an ongoing basis–which is all most calculations look at. Usually, embedded energy corresponds fairly closely to total cost of production. If this approach is used, high cost renewables (such as off-shore wind) probably generate more CO2 than comparable fossil fuel generation. Weissbach et al did an analysis that was published in Energy in early 2013 that suggested that renewables were an order of magnitude less efficient than fossil fuels in generating electricity (in other words, 1/10 as efficient) when all costs were included.

      5. The other thing that makes the situation a farce is the fact that we have two ways of cutting back on electricity use: (a) substituting renewables, which really doesn’t work because it is so terribly inefficient (except perhaps in the case of onshore wind, near where the electricity is used) and (2) reducing electricity usage by adding more insulation, eliminating drafts, and substituting more efficient light bulbs. The second approach does not have a strong lobby, because there is not a huge amount of money to be made from this approach. (In fact, if it is efficient, that is what one would expect.) The renewables industry as well as CO2 sequestration has a huge lobby, because of all of the academic research and profits it potentially generates. It also is a lot “sexier” and makes politicians look like they are doing something.

      6. I should add that there are some “renewables” that work. In some places, geothermal works. In some places, hydroelectric can be used. But it is usually obvious from the price that these approaches make sense. There is no need for big subsidies. Subsidies are a way of attempting to make water run uphill. They basically don’t work.

      • Thank you for your extensive reply! I took renewables as an example but the core question was “why is investing a larger part of our income and energy supply to produce more energy worse for the economy and society than using that energy and money to produce say plastic toys or larger TVs”
        You say in your post:
        “In a finite world, wages don’t rise as much as fuel and metal extraction costs rise, because the extra extraction costs add no real benefit to society–they simply remove resources that could have been put to work elsewhere in the economy”
        I completely agree and understand but should’t higher extraction costs also lead to more jobs in extraction, jobs to workers who pay tax and spend their money in the economy? Aren’t we just changing our consumption from products etc to energy but keeping the number of jobs in the economy sort of constant?

        • Ert says:

          @Robert

          The problem with “investing” is – regardless where you invest XXX$ – it will continue a failed paradigm. Every $ invested will consume energy, will consume resources, will increase CO2,will perpetuate the unperpetuateable.

          The only (global scale) solution I see is dis-investment. I reduced my work hours and income. So first I have to worry less where to invest my money in and second I have more time to build and create local things (garden, optimization & insulation of my house) that reduce my reliance on external energy and money. In addition I try to educate myself in things which I see will be important in the future – and provide value to the society and people around me.

          I think that is the only way.

          • Jan Steinman says:

            “The problem with “investing” is – regardless where you invest XXX$ – it will continue a failed paradigm.”

            With the exception of investing in primary food production, no?

            At least that’s the conclusion I came to, when I liquidated all my “investments” and put it into good farm land… at the peak of the market… 🙁

            Those investments I liquidated have returned nearly 400% in under six years. The farmland I put money into has depreciated about 30%. But it feeds and houses me — but by conventional measures, not nearly so well as the financial return I would have had, plus, I could have bought more farmland, had I sat tight in the market!

            No regrets. (Well, not many!) If the stock market crashes tomorrow, I’ll still be able to feed myself. But it does point out that we are on a perilous course, and there are no perfect crystal balls.

          • I would add–if you have things that are important to do, do them now. Get on good terms with your children, or stay on good terms with them. If you want to visit someone, or talk to someone on the phone, do it now. Don’t put things off. We don’t know how long being able to do the things we do today will be possible. If you have funds that you don’t think you will be needing, you might give them to your favorite charity now. Don’t be obsessive about finding investments that will work, because there aren’t likely to be any that will work very well. Maybe buying land will work, but even this can be taken away from you.

            • Jan Steinman says:

              “Maybe buying land will work, but even this can be taken away from you.”

              Yes. If a government of any kind survives, they’ll want taxes. This might even be a local warlord.

              At least if you can make the land produce, they might let you stay there, or you might make enough to pay tribute. Or not. But it seems a better shot than collecting bits of coloured paper at this point.

        • Think of it this way. Suppose we extract ore that is enough deeper that we need twice as many people to dig the holes. Those people are getting exactly the same amount of oil (or metal or whatever resource) out. The amount they should be paid should be based on their productivity, and thus should be some fraction of the what that oil (or metal) will ultimately yield in goods and services that can be produced. The workers’ productivity is only half as much as before, so they should be paid half as much. In other words, the oil that is produced will create exactly as much goods as services as before, but the benefits of these goods and services now need to be shared by twice as many workers.

          We can also look at the situation from the point of view of how many workers there are in total. Now that twice as many need to work in hole-digging, there are fewer to work at, say, farming. So less food will also be produced. Thus, the wealth of society goes down.

          • Unless the oil/metal company can double prices and make people pay the higher price? Maybe that won’t work at first but as Don and you argued, people adjust so in the long run there might be shift to where people spend more of their income on energy etc and cannot afford as many things as before, the world gets poorer in a way. But I’m thinking that this might not lead to collapse since we are consuming so many “unnecessary” things today and we still have some leeway for shifting things around a bit until we get to the point where we start to not afford really basic things like food production, education, health services, infrastructure etc.

            Of course such a shift can’t continue indefinitely. If already 25% of all workers were in the oil/mining industry then I think we would have collapse if the extraction costs doubled. But now we are just talking about a few percent, and energy costs being around 10 percent of peoples total costs. So there should theoretically be some room for adjustments without society going down in the process.(Maybe backing down to the standard we had 30 y ago?)

            Unless the extra energy spent in the extraction of minerals / production of energy leads to much fewer jobs than if the energy had been put to use in the rest of the economy. If that is the case we have a real problem when EROEI descends.

            What part of the picture am I missing here?

            • Don Stewart says:

              Dear Robert
              I think the part that is very important is to look at the debt load. Respectable Economists argue that debt is irrelevant. I think Respectable Economists are not exactly irrelevant, but certainly not too useful, either.

              Let’s suppose your were operating strictly on a cash basis…let’s say a drug dealer. Every week you buy some drugs from somebody and you retail them out to the public. Nobody is going to give you a loan. And you won’t take any checks. So you are living and making a living in a world where all the feedbacks are physical and fast. If you have to pay more money for the gas in your car, you are going to have to adjust either your income or some of your expenses. If the price of gas doubles, and it is 5 percent of your total outlays, then you make some, perhaps painful, choices.

              But now let’s assume that you have a respectable job, working for a TBTF bank selling overvalued securities to sheeple. Every day you observe the magic of money printing and the resultant debt. So you are in debt up to, and perhaps above, your eyeballs. You can see that the string is stretched very, very tightly indeed. One little slip and everything, from your Greenwich mansion to your sailboat and your trophy wife, is going down the tubes. When that stuff goes away, it hurts not only you but also everyone who depends on those things to make their own living.

              I think that the ability to adjust to changes in the physical world is enormously damaged by leverage. In theory, the bankruptcy courts deal with failures of leverage to keep the real economy on a more or less even keel. But the many historical panics and their aftermaths suggest that the bankruptcy courts don’t work well enough to avoid a lot of pain.

              If I were the King, I would promptly go about trying to make the bankruptcy process as efficient as possible in terms of protecting the real economy.

              Don Stewart

          • Hm, I reread your post “The real oil extraction limit” and now I think I might understand.

            Making a shift to paying more for energy/minerals and consuming less goods, but still keeping as many jobs as we had before with the same salaries, won’t happen. Because when people consume less goods, total demand for energy drops, the high energy prices can’t be kept up and then total energy production falls. (Thus no new jobs in the energy sector to make up for the lost jobs in production of goods etc.) This puts us permanently in a situation where we buy less goods and use less energy but pay the same prices as we did before, a sort of forced degrowth, (I guess unemployment would be very high in this scenario?)

            Would this be a correct answer to my previous question?

            • Yes. And you are right, unemployment would be very high. It takes energy for modern jobs — less energy leads to fewer jobs (unless jobs are similar to digging with a stick in the ground. Such jobs don’t require fossil fuels, but do require food for the workers).

          • Danny says:

            “Don’t be obsessive about finding investments that will work, because there aren’t likely to be any that will work very well. Maybe buying land will work, but even this can be taken away from you.” Thank you for this I have been fretting about this for so long it exhausts me. Ever since 2008 I have worried, about not being in the stock market and investing in this or that. I know that Automatic Earth tries to tell people what to do and how to prepare but they are only preparing for one type scenario. But she is basing a lot of her advice on how people are surviving in Greece, the only problem I see with that is that by the time we are like that in the U.S we will see chaos on the exponential level throughout. Danny

        • SlowRider says:

          Manpower doesn’t play a big role in fossil fuel extraction. Watch any movie about conventional or unconventional oil production. It is all based on economy of scale with lots of steel and engineering. And it must be cheap enough so that people can buy and use it. Once that system stops, our standard of living is over.

          • So are you saying that the extra energy spent in the extraction of minerals / production of energy leads to much fewer jobs than if that energy had been put to use in the rest of the economy?

          • SlowRider says:

            “So are you saying that the extra energy spent in the extraction of minerals / production of energy leads to much fewer jobs than if that energy had been put to use in the rest of the economy?”

            Let’s look at oil, the master resource. If we have to double our efforts to get the oil out of the ground, that means we need 2 times of everything involved in the process: education, exploration, construction, insurance etc. If right now (just to give a number) 0.5% of all jobs are in oil production, then after the doubling, that would be 1%.

            But the new oil would have to be much more expensive to make extraction economic, let’s say the price would have to be 50% higher. This will do much more damage to the economy, in the form of bankruptcies, layoffs etc., than the few oil jobs we gained. In the end, demand collapses, so the price would drop below our new extraction costs, and we would have to leave the oil in the ground.

            I believe this is what could happen soon to many unconventional oil projects.

          • SlowRider says:

            I just saw further down, that Gail already pointed to the other side of the coin: lower incomes in the oil business. As she says, in the end this would have the same result.

          • SlowRider says:

            Hmm, I’m not sure I really agree with the “lower payment for less productivity”. It seems very difficult to get oil experts to work for half an income, unless everyone else also has to. I always come back to oil becoming too expensive for our economy, or people being to poor to buy it.

          • I agree manpower doesn’t play much of a role in fossil fuel extraction. But it takes at least twice as much manpower (per barrel of oil) to drill small fracked wells as much bigger un-fracked wells. And it takes a lot of other resources, or the cost wouldn’t be so high.

            We have moved from big reservoirs that are easy to extract to much smaller ones that are harder to extract, and don’t last as long once they are drilled.

          • Paul says:

            Manpower has been replaced by energy – and as energy gets more costly its like requiring more men to do the same job – so the impact is the same no?

      • Don Stewart says:

        Dear Gail
        In response to your first point above about ‘what printing money actually does’. I have not worked all this out, but perhaps a few preliminary thoughts may stir some response.

        First, let’s look at an experimental result. This question is posed to college students:
        You are walking across the campus to the library to work on a paper which is due soon. But you notice that a lecture by someone you would like to hear is being offered. Do you continue to the library or go to the lecture?

        40 percent continue to the library.

        Now modify the question slightly. The modification involves finding that both the lecture and also a foreign film that you have been wanting to see are available. Now which of the three options do you choose?

        80 percent continue to the library.

        Psychologically, choice is hard. Having more choices makes our life more difficult, and we are likely to avoid choosing by remaining on autopilot. (Retailers have perfected the art of displaying just enough choices, but not too many).

        When the government prints money, they seem to be eliminating the necessity of choice. For example, people are loath to choose between ‘buying a banana split or saving a starving child in Africa’. But…if you have spare money, you can tell yourself you can do both…there is no need to choose.

        Humans also think in terms of pots of money. They mentally set aside a certain amount for gas and a certain amount for groceries. If gas increases in price, they see the pot as empty, and cut back on gas. They do not (in the short term) rebalance their purchases of gas and groceries, as Economists would predict. Printing money is a way for the government to enable people to seem to escape the need for rebalancing, which is a form of choice.

        Of course, in the long run, choice is inevitable. In a world where debt is our currency, I think we generally hit limits when the banks won’t loan us any more money. What happens at that point appears to be a gigantic loss of standard of living. Suddenly, although our physical productivity hasn’t changed very much, if at all, we have far less money. Because we don’t have the increase in debt which had been funding us, and also because the creditors want full repayment because they now perceive us as poor credit risks.

        Don Stewart

        • Jan Steinman says:

          “Psychologically, choice is hard. Having more choices makes our life more difficult, and we are likely to avoid choosing by remaining on autopilot.”

          As a famous Canadian put it, “the kind of crazy you get from too much choice.”

          Harvard social psychologist Dan Gilbert has me convinced that those with the fewest choices are the happiest with their lot. In an ingenious double-blind experiment, he used brain-injury patients who could not form long-term memories. He found that they were happier with no chance to trade a picture they owned than with the opportunity to trade pictures — and they didn’t even remember that they owned the picture! This suggests that the linkage between choice and happiness goes back to before the evolution of the cerebral cortex.

          With this in mind, I find myself systematically limiting my choices, often taking actions that would restrict future choices, contrary to common wisdom to “keep your options open” and take actions that increase future possibilities.

          I think this is vital to community living in an energy-constrained future. The common attitude that “if this doesn’t work, I can always try something else” is an energy-rich attitude, one that didn’t exist in the past when people were born into their tribe or village and faced even death if ostracized.

          As Dan Gilbert says — which I have on a sticky note on my monitor — “The reversible condition is not conducive to the synthesis of happiness!”

        • Thanks Don thats interesting. So you are saying, higher extraction costs for energy (lower EROEI etc) won’t lead to people spending more money on energy and less on other things, it leads them (through the government) to take on more debt?

          • Don Stewart says:

            Dear Robert
            Yes. However, over time, people adjust. For example, the people in Europe have adjusted to paying far more for gasoline than the people in the US.

            In the US, we used to spend 30 percent of our income on food. Now it is less than 10 percent, I believe. If food reverted back to 30 percent one fine spring day, then people would desperately try to cut their food bill and many would resort to payday loans. But over the years, they would adjust to food just costing a lot more–as it once did. In 2009, I remember seing billboards for beer. It showed a bunch of blue collar guys drinking beer and looking happy and the tag line was ‘life sucks, but you can still afford some of the good things’. This was, I think, an effort to keep ‘beer with the guys’ in its own little bucket of money.

            I think that something similar has happened in the US regarding gasoline prices. When the price goes from $3.35 down to $3.20, then people breathe a sigh of relief. I think they have adjusted to the reality that it isn’t a dollar a gallon anymore. When Zero Hedge reminds everyone that gasoline had never been more expensive on January 1 than it was a few days ago, I don’t think anyone paid any attention. When chart mavens point out that income disparities are the same level as 1929, most Americans tell Pew that they could care less. So memories are short and people do adjust to the new realities. But in the short term, people think in terms of buckets of money.

            Don stewart

            • I think people can adjust, if we are working with a slow change and small adjustments. Small adjustments that make people richer, such as the drop in the price of food, “work”. Small adjustments to collect taxes in a different way (as a tax on oil, rather than as a different type of tax, in Europe) also work.

              Once a system adapts to a new system, if big changes occur, such as oil prices not rising high enough for adequate production, or major debt defaults, then we could see a very different situation. People don’t adapt well to grocery stores no longer being open, or to fuel for their car no longer being available, or to no longer having a job and the government not providing unemployment compensation.

        • The way the money is being printed now, I don’t think it really is getting back to people much, except as higher values for their homes and lower interest rates, so that they can afford homes and cars. If there are massive loan defaults, and the government gives FDIC coverage to all, that could be inflationary–except that it is mostly offsetting huge deflation, because the loans previously seemed to have value.

          I agree that too many choices are confusing. Also, if a person is hurt, they have a better chance of being helped by a single person passing by, than by a whole group.

          • SlowRider says:

            “The way the money is being printed now, I don’t think it really is getting back to people much”
            Am I wrong? To me it looks like that:
            1) Central bank buys unlimited amount of government bonds
            2) Government can continue to pay workers, military, entitlements, interests…
            3) Money is spent in the economy
            a) Central bank keeps interest rates low
            b) Government doesn’t have to default (although it is bankrupt)
            c) Can continue to operate, pay workers etc.

            Opposite:
            1) Government has to declare bankruptcy
            2) Has to shut down, cannot pay its debts
            3) Depression, collapse

            • I agree that if QE is stopped, the game of musical chairs likely stops. The amount of deficit spending can’t continue, interest rates will rise, bond values will fall, stock values will fall, and the government will be in big trouble. Thus QE really has helped.

              But bank lending to ordinary citizens has not risen much–QE doesn’t get to this part of the economy. Most of what QE does is prevent a catastrophe that most people don’t realize has a distinct likelihood of happening without QE.

          • Don Stewart says:

            Dear Gail
            Does a bank ‘print money’ when it issues a loan? For my purposes, it does. Rather than have to save up money to buy a car (which was true when I was young), one can just borrow the money. So,,, when I was young, families took out savings accounts and deposited money in them every week or when they had some and eventually bought a car. Every week the family would forego some current consumption in order to save the money needed to buy a car. This was a clear choice. The availability of auto loans in 1955 changed everything. The loans doubled the number of cars sold (as I recall) and had profound psychological repercussions.

            Now consider the Federal Reserve and their money printing. First, they are buying Treasury bonds which permits the Federal Government to spend money it doesn’t have and has no prospects of ever getting (except through theft…bail-ins of various kinds, including inflation). Second, they are making mortgage money available so that people who do not have (and likely will never have, according to you) the money to buy the house can actually get a loan.

            A local non-profit is going to run, this year, a ‘small house contest’. The leader of the non-profit and her husband built a small house themselves about a year ago. I am quite sure no financing was involved. So, psychologically, we might say that the choice people would have in a Natural World would be to either build a small house, with a lot of sweat equity, and perhaps room by room, or else to save up a half million dollars to purchase the houses that get advertised. But the choice is painful. The Federal Reserve is strongly tilting the scales toward the consumption of the half million dollar house…no need to choose! you can have it all!.

            Don Stewart

            • I didn’t realize 1955 was when car loans came available–that was before my time.

              We don’t usually say that a bank “prints money” when it issues loans, although the principle is similar. I think the problem recently has been that there hasn’t been much increase in bank loans even when the Federal Reserve did all the QE.

              The Federal Reserve is definitely trying to encourage buying big homes and replacement cars with their ultra low interest rates. The low interest rates have helped increase demand for homes–business groups buying them, hoping to rent them out and make a profit when prices rise, so home prices have risen.

          • Paul says:

            SR – I would agree with Gail – the QE is not reaching the people – but what it is doing is ensuring that people do continue to get paid – whether it is a salary or a pension.

            QE is certainly not resulting in people receiving any more money.

            Essentially I see QE as delaying total collapse.

          • SlowRider says:

            Paul – so we would be arguing more about definitions.
            You say, they just delay collapse but nothing really changed for people.
            I say, these people would normally be unemployed, but they continue to get paid with freshly borrowed/printed money. So they actually do get that money, right?
            If the greek government could borrow money from it’s own treasury, everything would be “fine” there. But as it cannot, they have have to close hospitals and schools.

            • The Greek government can’t print money. Being part of the Euro, it is stuck with what is there. It can do deficit spending, which is what I think you are talking about to give money to the unemployed, but that is what the lenders and the rest of the Eurozone are so unhappy with. The Euro was set up assuming all countries in the Eurozone would balance their budgets, or at most run a small deficit–I forget the percentage. Greece has been way over the allowed percentage.

          • Ert says:

            @Gail

            Using ELA (http://www.ecb.europa.eu/mopo/ela/html/index.en.html) a national central bank – can “extend its balance sheet” on their own to provide their bankrupt banks with liquidity to buy government bonds…

            • It sounds like that is a workaround for the problem of countries that are part of the EU not being able to adjust their currency up and down. I have no idea how it works in practice. I am sure it is limited to funds available.

      • Just to ad, I do understand that if a singe country invests a larger and larger share of their resources into energy production (for example by investing heavily in renewables) they will fall behind other countries and therefore eventually run into economic problems. I was more wondering what hypothetically would happen on a global scale.

        • edpell says:

          Let’s see the US, Russia, and China spend lots of their resources on war. Germany spends lots of its resources on solar. In the end Germany will still have the lights on when the others go dark.

          • I am not so sure. It is not clear to me that Germany’s system will provide the long-term benefit they hope. It provides only intermittent power, and they are having trouble keeping the natural gas providers from quitting. The cost to the German people and businesses is quite high.

          • edpell says:

            Gail, I agree with you. But I think Germany will have a less painful ride down with the resources they are investing in. It may not be sustainable but it will provide some mid term mitigation.

        • See my previous answer. The world produces less, and everyone (on average) is poorer.

          • SlowRider says:

            The Germans hope to be the global leader when it comes to “green technology”.

            • I think “hope” is the important world. According to this article about German solar,

              . . .the revenue share of Chinese firms increased from 11% to 45%, while that of Germany declined from 64 % to 21%, between 2005 and 2011.

              Instead of importing natural gas, Germany is importing solar panels from China. They are also burning their own coal, and raising CO2 emissions.

  32. Pingback: Vad är en ändlig värld och var befinner vi oss? « ASPO Sverige

  33. edpell says:

    Gail, spot on as always. I like that you talk about workers. Most economists talk about labor like it is a commodity like copper or oil.

    I think big systems change slowly. I think we can kick the can down the road to 2020. Debt can be rolled over as long as the federal reserve bank it willing to buy the never to be paid back debts. I think we will have to wait until the owners of real inputs like oil, copper, etc no longer accept paper. When the owners of hard assets realize only hard assets are worth exchanging for. Oil for farm land. Copper for ownership of water resources, etc. I do not see KSA doing this. They are too lost in their decadence and cultural extremism. I do not see Nigeria doing it they are run by a gang of thieves. Maybe Venezuela, maybe Mexico, maybe Canada? Or are they all to influenced by the US? Maybe it will come down to smart owners of energy resources in the US.

    • We can hope that things stay together until 2020. I think Venezuela is already running into financial problems. If too many exporters run into financial problems, it will hurt world oil supply, and bring the system down sooner (from a different direction).

    • Jan Steinman says:

      “maybe Canada?”

      Not as long as Steven “I wanna be an American!” Harper is in charge!

      In fact, he is so busy giving away public resources, shutting down and destroying public treasures, and negotiating “give it all away” trade agreements, that he makes the US look like a Scandinavian country! All on 38% of the vote — over six of ten Canadians voted against him.

      The closest thing to Harper is Ted “I don’t wanna be Canadian” Cruz. We are very seriously hosed here.

      • edpell says:

        Yeah, I think Canada is crazy exporting energy, especially the way it is being done. The citizens of Canada get pollution for thousands of years, a few people get larger Swiss bank accounts, and the US and China gets some oil to burn today.

        • Jan Steinman says:

          There are powerful opponents. Enbridge and Harper are trying to divide up the First Nations (“Native Americans” in Mercan dialect) by making sweetheart deals with each tribe. But so far, it looks like the multitude of First Nations can stop the Northern Gateway.

          (As expected, the Harper Government’s panel thoroughly ignored tens of thousands of public inputs and approved the pipeline. Go figure.)

          Green Party leader Elizabeth May says that if we’re going to dig up the tar sands anyway, we might as well process it on-site. I don’t know the costs, but it seems to me that disassembling an entire refinery, moving it to the Athabasca, and re-assembling it might be less work than building a pair of thousand kilometre pipelines, while supplying more jobs and greater energy independence. But I don’t make the rules.

        • I expect Canada needs the exports to keep its economy going, though.

      • Paul says:

        I have not lived in Canada for years but always wondered why my fellow citizens voted for this clown – surely after Mulroney we should know that the Conservatives are America-lite.

        What amazes me is that they take credit for not creating a banking crisis like the US – if the PCs would have been in power in the run up one can guarantee that banking regulation would have followed that of the US and Canada would have had exactly the same problems.

        Of course the PC’s have since created massive housing and debt bubbles so Canada will have its day yet.

        I might also add that I would be quite happy never to see Toronto again – it resembles everything I despise about America – the disease has crept across the border.

        • Jan Steinman says:

          “I have… always wondered why my fellow citizens voted for this clown…”

          It was an engineered election. More than six of ten voters voted against Harper!

          Karl Rove deserves much of the blame. He has been seen in Ottawa numerous times, coaching the Conservatives on how to engineer an election.

          They employ “dirty tricks” to win key seats by a slim margin — often simply the largest minority of votes — while ceding other ridings where they have no chance. (Elections Canada has found that illegal practices took place in the last election, but Harper has successfully thrown low-level minions under that bus.)

          I love multi-party systems, but for them to thrive, they need something other than “first past the post.” Unfortunately, those who thrive in the current system have convinced the public that proportional representation is too complicated. It got 58% of the vote in BC — in a referendum that the ruling party deemed required 60% of the vote in order to pass. 🙁

          • Paul says:

            I read some years ago that Rove made his name by passing out flyers informing blacks in a certain district that the election date had been changed (or the location of the voting booths – I can’t recall which – probably both).

            I mentioned this to an American friend and he thought it was great – creative – entrepreneurial even.

            And Americans wonder why their country is coming apart at the seams.

            Morris Berman hit the nail square on the head in Dark Ages America

  34. timl2k11 says:

    It hasn’t always been clear to me how QE and other financial shenanigans can “delay” collapse. But it has become clear to me now, and your article touches on it tangentially. QE is about collective psychology and making things look better than they really are. Because things look better than they really are, there is no change in the behavior of the collective. Fuel consumption is coming down a bit, but not near as much as it needs to. Recession, depression, severe economic contraction – whatever you want to call it – is the cure to our problem (or at least alleviates it) which is over-production and over-consumption, (too much economic activity), not the problem itself.
    We had the cure at hand with the seizing up of the credit markets. If things had been allowed to run their course it would have been catastrophic at first (and on the surface), but beneficial in the long run.
    Our society is not behaving the way it should given the limits we are reaching, we are behaving mostly BAU, mostly thanks to QE and other actions by central banks around the world. The only effect of delaying economic contraction is to cause an even greater and dramatic disaster further down the road.

    • I see collapse as so bad as to be avoided at all costs. So I can sympathize with QE and other shenanigans.

      I don’t think that there is an issue of “delaying economic contraction and causing an even greater and dramatic disaster further down the road,” unless you are talking about the small increase in population that happens during that time. Collapse will be terrible, regardless of when it starts.

      • donsailorman says:

        I agree with you that “Collapse will be terrible, regardless of when it starts.” My guess is that it will not start in 2014. The big threat of deflationary depression was in 2008, and with massive fiscal and monetary stimulus we dodged the bullet that time. Current financial conditions are much less unstable than they were in 2007 and 2008.

        Also I am not convinced that deflationary depression will be the scenario when collapse does come. An inflationary environment with the U.S. running deficits of two or three trillion dollars plus QE4 or QE5 is plausible to me. When unemployment rises, there is great political pressure to increase government spending and to cut taxes. To finance multitrillion dollar deficits the Federal Reserve System will have to greatly increase the pace at which it buys U.S. government securities. Note that there is no limit whatsoever on the Fed’s purchase of government securities: Even if private investors refuse to buy U.S. government securities, the Fed can buy as much as is necessary to finance federal deficits and keep short-term interest rates relatively low. Long-term interest rates will tend to follow the expected rate of inflation, however.

        My guess is that we will have inflationary stagnation followed by inflationary collapse. I realize, however, that deflationary depression is possible, regardless of fiscal and monetary policy.

        • It will be interesting (?) to see how things really work out. I hope you are right that the collapse holds out for a while longer. I think discontinuity is a possibility as well–no electricity, so no knowledge of how much is in bank accounts, for example. Or major government change, within a few years.

      • Joe Clarkson says:

        Every year that collapse is delayed means an additional 75 million people will starve when it arrives. I don’t see 75 million people per year as a “small increase in population”.

        Especially in light of climate change, I say the sooner collapse arrives the better. Let what survivors there may be have a livable world.

        • I am not sure that starvation will be the means by which people die. I expect diseases will rise rapidly, taking people quickly and less painfully. Water problems may give rise to some of these disease as people find that they need to drink contaminated water, and don’t have the means to sterilize it. There is also likely to be a lot more deaths through war and local fighting.

          I also don’t think there will be any measurable difference in the livability of the world, after climate change. We are not talking about a big difference in emissions.

          • Joe Clarkson says:

            You may very well be right about disease. It is almost impossible to guess which of the four horsemen will be the cause of depopulation. As members of small communities, we can somewhat prepare for Famine and Disease, but War is much more difficult, even less so early Death.

            I do disagree about the climate change issue. At the rate we are emitting carbon it makes a big difference whether emissions continue for four years or forty years. If you believe climatologists James Hansen and Kevin Anderson, to keep a livable climate the rate needs to go to zero immediately (and then negative if at all possible).

            I know that you don’t think that BAU can last for forty years, but even ten or twenty could be a disaster. What is your take on the maximum time that the world economy can last before a major collapse?

            • I think we are already seeing the beginning of collapse. Egypt and Syria and a number of other small countries are already starting to collapse. Europe’s low growth points to it being well on the way to collapse as well. We have oil exporters with problems as well–Venezuela, South Sudan, Libya, and Iraq, for example. These problems are likely to spread across borders, as refugees need a place to go. China is reaching pollution limits, even if it can keep its oil and coal production up. So I see collapse as basically a “now” situation, rather than 10 or 20 years from now. By forty years from now, I don’t expect many will be left to care one way or the other about climate change.

          • Hansen:

            One implication is that if we should “succeed” in digging up and burning all fossil fuels, some parts of the planet would become literally uninhabitable, with some time in the year having wet bulb temperature exceeding 35°C. At such temperatures, for reasons of physiology and physics, humans cannot survive, because even under ideal conditions of rest and ventilation, it is physically impossible for the environment to carry away the 100 W of metabolic heat that a human body generates when it is at rest. Thus even a person lying quietly naked in hurricane force winds would be unable to survive. Temperatures even several degrees below this extreme limit would be sufficient to make a region practically uninhabitable for living and working.
            http://www.columbia.edu/~jeh1/mailings/2013/20130415_Exaggerations.pdf

      • Paul says:

        100% agree with that comment. There are those who say bring it on – or those who criticize QE ZIRP – I say be careful what you wish for – because I don’t think anyone can even remotely imagine what is coming.

        Think of the most dire Oxfam commercial – or think of famine in Ethiopia – now imagine that most (all?) of the world being in a similar situation.

        One way I try to envision this is I think about what it would be like if the grocery store shelves were bare – how long could I last? I think that puts things into perspective – because that is what is coming.

    • dolph says:

      I agree.

      I admire Leo’s persistence in trying to push for “industrial sanity” if you will, but I’m afraid he will fail. Our entire system is designed to grow as fast as possible and collapse as fast as possible. We simply won’t allow for any recessions that moderate growth. We all buy into the myth so we can accumulate more worthless fiat currency, all the while pretending our standing relative to others is increasing and that we will live forever. What we are in fact doing is rapidly using up the resources while building an infrastructure that is not going to be maintained.

      This represents a dramatic betrayal on the part of the establishment that was set up after WW2. The lessons learnt have been forgotten, and now we have problems 5 times greater than before.

      • Paul says:

        Agree -there is just no way we will have anything that even remotely resembles what we have today.

        This system is built on an ocean of cheap energy – the energy is gone – this system will go

        But it will leave 7B+ people in its wake. That is the problem

  35. Leo Smith says:

    whilst you are correct to say that consumer debt is emphasised in a downturn, its not true to say that industrial investment debt increases. In fact the reverse is true, building for a same sized or smaller tomorrow requires less debt.

    Perhaps a key way to understand the changes is to realise that resource limits must mean the end of population increase and globalised consumer society.

    What it need not mean is the end of industrialised society. As I have pointed out there is an adequacy of energy and enough materials to support a declining population: What has to take place for a smooth, rather than collapse transition to that state – and that is a bigger problem as the psychology, systems and habits of governance are geared towards an expanding model.

    Therefore whilst governments may collapse under burdens of unsupportable debt, society itself may prove more resilient.

    Coal and unconventional petroleum products will smooth the transition: meanwhile a squeeze on centralised governments ability to proxy for actual local organisation and free market initiative will be limited: the greatest fear is that governments and banks will raid private capital in order to support their political goals, leaving in the end no actual capital left to invest in the things that have real value. That is governments will raid the piggy banks to buy sweets for the electorate, instead of investing in things that we really need, like new power systems and fundamental infrastructure. How far that process goes, is down to an imponderable level of public sophistication and awareness.

    We have selectively bred compliance and stupidity into populations, with Big State maternalism.

    Ergo it is perhaps a throw of the dice which nation will grasp reality first, and end up rejecting the massively overweight bureaucracy that stifles the west, and discovering a new free market entrepreneurial-ism that actually forges the new future. That renaissance will come from areas that have some resource left, are not burdened by overpopulation, have a quality of technical education, and are overall inclined to favour private capital.

    Perhaps in the end it wont even be a nation, by a select group of powerful individuals who will be able to move capital around beyond national boundaries and invest it in wherever they can see it being effective.

    • dashui says:

      East India Company II?

    • Mark N says:

      “Perhaps a key way to understand the changes is to realise that resource limits must mean the end of population increase and globalised consumer society.”

      Ending population growth and consumer society will break industrial civilization. Industrial civilization must expand or collapse. Industrial civilization has added debt to appear sustainable but it is just illusion. Industrial civilization no longer pays for itself and will soon implode. The rulers of industrial civilization will never try to power down or end growth as growth is their religion.

    • It is really the energy and metals part of the business sector that finds a need for more indebtedness, just to stay even. This is the part that tends to pull the rest of the business sector down. If prices are too low (as they often are on commodity boom-bust cycles), then production gets cut way back. It is hard for workers to stay employed.

      I expect that unconventional oil will suffer greatly, in any credit crunch, or shift toward higher interest rates. Perhaps coal can continue for a while, but it needs oil for transport.

    • John Dunn says:

      “….the greatest fear is that governments and banks will raid private capital in order to support their political goals, leaving in the end no actual capital left to invest in the things that have real value.”
      That is precisely what will happen. Cyprus was a test bed for the move from taxpayer ‘bail out’, to depositor ‘bail in’.
      ZIRP, printing imaginary money, bail ins, bail outs, stagnant wages are all financial ways to extend the pretence, by robbing your financial future, and that of your children and grandchildren.
      And that is why much of your more positive views on the future will not happen, because we are in the process of eating the savings ‘seed corn’, and global financial cannibalism. It’s not that your ideas might be wrong. It’s because the (energy backed), financial wherewithal will not be there to support the transitions that you dream of.

      • Ert says:

        @John

        Reinhard & Rogoff (This Time it’s Different) recently published a new IWF working paper “Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten “: http://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf

        Quite interesting sections…

        Europe in denial: “In Europe, where the financial crisis transformed into sovereign debt crises in several countries, the current phase of the denial cycle is marked by an official policy approach predicated on the assumption that normal growth can be restored through a mix of austerity, forbearance, and growth. The claim is that advanced countries do not need to apply the standard toolkit used by emerging markets, including debt restructurings, higher inflation, capital controls, and significant financial repression.”

        Debt as High as ever: “In fact, going back to 1800, the current level of central government debt in advanced economies is approaching a two-century high-water mark.”

        And out of the historical solution toolkit: “Financial repression has already been mentioned; governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand.”

        So you may be right.

  36. Jarle B says:

    Good overview, Gail – I think some of my “the sky is blue”-friends will have to read it!

    In Norway, one of the richest countries in the world, the house prices are now falling:

    http://www.reuters.com/article/2013/12/02/norway-housing-idUSL5N0JH1X220131202

    http://www.ssb.no/en/bpi/

    How can this be interpreted? We are still producing oil and gas, and the unemployment rate is low. Have we reached limits to debt?

    • Ert says:

      @Jarle

      I think the article you have linked to answers the questions:

      a) “Norwegian households are among the most indebted in the world, with debt at around 200 percent of disposable income, more than twice the rate in Germany, and the IMF has previously said house prices could be as much as 40 percent overvalued.”

      b) “Analysts said the central bank would probably delay a rate hike, previously flagged for next summer…”

      c) “The Confederation of Norwegian Enterprises (NHO) recently said Norway’s increasingly tight bank capital requirements were the main reason for the country’s economic slowdown because the measures amounted to a de facto monetary tightening.”

      So over-indebted people, a central bank that wants to (medium/long term) increase the rates and tight (good) capital requirements for banks (no liar loans). Sometimes there are real limits – and if houses are financed for 20-30 years…

    • I keep hearing information from Rune Likvern in Norway about the situation with Norwegian oil, quoting articles in Norwegian. Basically, the Norwegians are finding that the small fields they have been trying to tap recently are giving very poor results. They are not making money on them. So Statoil has announced that it is focusing on making money, not increasing (stopping decreases in) oil production. I am sure that this means that it is hiring fewer people than they would otherwise. Also, Statoil has had to borrow a lot more recently, to keep its operations going. I would imagine in this situation, bonuses would be less generous.

      The other part of the story I hear is that Norwegian citizens borrowed huge amounts, as wages directly and indirectly from the North Sea rose. With this money, they could afford the high priced homes and cars. The problem comes if the increase in wages and debt doesn’t keep happening. Then spendable income goes down, and number of folks who can afford new homes drops. Prices on homes starts dropping, and suddenly people have trouble paying back their loans when they want to sell their homes.

      So wages are at least part of the problem. One article mentions a change in banking rules that would tend to reduce lending. I would expect this banking rule change is part of the reason for the decline in Norwegian home prices as well. The changes in Norwegian oil investment seems to me to be more a change in the future, rather than one that has affected people already.

    • Rune Likvern says:

      Gail, first of all nice post.

      A little while ago I put up a post at Fractional Flow looking at the economic drivers of Norwegian economy;
      http://fractionalflow.com/2013/12/14/a-closer-look-into-the-drivers-of-the-norwegian-economys-recent-growth-success/

      • Thanks Rune! You see a lot of things the way I do. There are a lot of good quotes in your paper. For example,

        Presently many oil companies have bet their financial future on consumers’ abilities to continue to go deeper into debt in order to buy the more expensive oil (from more exotic areas like the Arctic) which will allow the oil companies to retire the debts acquired for the developments of these sources.

  37. Ert says:

    Thanks Gail – a very good article. I also though that you had a funny title for the article – some politicans and industry leaders may now propose a solution in the like of “We have to grow the circumference World” – so that the World keeps pace with their wishes of growth 😉

    The whole article and the resulting dilemma summaries something Dennis Meadows recently said in an interview with the Volkswagen Foundation (which curiously enough – sponsored his wife’s and his MIT study 40 years ago which resulted later into the book “Limits to Growth”).

    Mr. Meadows said: “Climate change is not the problem – the problem is that we want infinite growth on a finite planet”

    Source of the video-interview: http://www.volkswagenstiftung.de/de/media-center.html?tx_itaomediacenter_itaomediacenter%5Bvideo%5D=25&tx_itaomediacenter_itaomediacenter%5Baction%5D=show&tx_itaomediacenter_itaomediacenter%5Bcontroller%5D=MediaData&cHash=7da1721eea42511b8fd7b5931d19dacd (the whole 50 min. Interview may also worthwile your time).

    • Thanks! That is a good quote. I did listen to the interview–it included a few things I hadn’t heard before. I think Dennis Meadows reads at least some of Our Finite World.

  38. Kim N says:

    Gail, I enjoy all of your posts, although this is the first time I write to you. That’s because climate change is one of my deepest concerns, and because it’s still difficult for me to understand and even find information about the interactions between the energy and climate crisis. I think ecomomic factors you propose should be in the equation.

    Throughout your articles, you highlight the fact that we are reaching the limits of exploitation of most essential natural resources -particularly oil production and its associated EROEI decline-, how this situation entails a series of economic consequences that exacerbate the physical problem itself, and why ultimately these factors are leading us, in a not far future, to a economic collapse that means, in fact, the end of industrial civilization.

    In this post you claim that “climate change models include far too much future fossil fuel use, in both their standard runs and in their “peak oil” scenarios”. Seen this way, can we expect that global economic meltdown that we face be so close and deep that may avoid, after all, a runaway climate change?

    Don’t you think, on the other hand, these models may also be underestimating other factors like deforestation, wich could be intensified in a context of widespread energetic-economic-food crisis?

    Thank you very much.

    • Ert says:

      @Kim

      The current climate models are even much to “optimistic” in that way that many feedback-loops are left out. Currently it seems that the release of Arctic Methane was already triggered: http://arctic-news.blogspot.it/2013/12/the-biggest-story-of-2013.html

      Try to Watch Jeremy Jackson (Senior Scientist Emeritus at the Smithsonian Institution and Professor of Oceanography Emeritus at the Scripps Institution of Oceanography) – “Ocean Apocalypse”, hold at US Naval War College: http://www.youtube.com/watch?v=2zMN3dTvrwY#t=18 – which also goes into climate change and arctic ice – its 100% worth your time!

      If you have more time, read „Climate-change summary and update“: http://guymcpherson.com/2013/01/climate-change-summary-and-update/ – where Guy McPherson tries to summarize and link any recent climate study. If you read that… its terrifying.

      According to all of above: If we would deindustrialize NOW – we probably would not keep anymore the 2 degree goal in 2100 – but may avoid the arctic methane release. But if we burn what we can until 2030, even with PO in 2015 and Peak Coal in 2020… read and watch for yourself.

      • Lindon says:

        Ert, in my opinion, TPTB and their scientific experts are also looking into the crystal ball and seeing “what will be” in 2030, assuming they manage to keep BAU going till that time. And what they see is exactly what you and I and the main percentage of world scientists see — total disaster! That’s why TPTB simply MUST STOP BAU at some point. To do that, all they have to do is induce a financial disaster somewhere — easy to do considering the whole world financial machine is floating on thin ice and just about any failure anywhere will have a domino-like cascading effect. If TPTB start a small fire somewhere and let it burn, versus jumping in to put it out, then that fire WILL grow and spread. I call it “pulling the plug” — and we can expect that to happen pretty soon, IMO.

        • Ert says:

          @Lindon

          Unfortunately I see the world differently today – I’m much more pessimistic.

          The World, the countries, the companies – all struggle along. Everyone including TPTB try to hedge their bets (only look at the US foreign politics and military). There will be no general reaction until the problem become unbearable – and then it will be to late.

          Also many believe in “technofixes” – that some miracle happen – or “technology will save us all”. Kurzweil, Diamondis and all the other at Singularity University (yes,such thing exist) – and many other influential and powerful people are of that thought.

          No one wants to give up, no one wants to reduce – not wealthy persons, not the middle income class, not the poor people. I think this politically impossible only after a dozen more Sandys and after Miami is under water after a big storm (see the Video of J. Jackson I’ve linked above).

          • Lindon says:

            I get your point, Ert. Isn’t it ironic when the most “optimistic” outlook is that someone somewhere in the world recognizes the approaching doom and has the resolve and the intelligence and the means to preempt the worst case scenario by bringing on the second-worst scenario — much like stopping a raging fire in its tracks by burning a large part of the forest and the city that the raging fire was going to burn anyway, just to preserve some small portion. There IS reason for that “optimism”. The U.S. Military certainly understands the consequences of frittering away the last of our energy and resources on BAU, and if you don’t think the U.S. Military has the means and the command control and the iron-fisted determination to ACT when faced with disaster, then you don’t know the U.S. Military — if anything, they are “trigger happy” and will act sooner rather than later. Count on it.

          • Ert says:

            @Lindon

            I know much to less to speculate about the US power structure in so far as of who controls the military or is the military (complex) controls it all. But I know from reading parts of Chomsky what the US does to enforce their interests – and I see whats going on in the world.

            But if come worst to worst – I do not think that the US can engage in a conflict with any real major and resource staffed power in direct military conflict alone. The primary power basis for the US Military are the 12? aircraft carriers and their approx. 760 foreign bases of different size… and those depend on some dependencies or mutual gains.

            So, yes – we will so more conflicts – but the only thing that they will provide is a faster collapse – viewed from a global perspective. May the cockroaches live long and prosper and be free of the by humanity! 😉

    • I honestly don’t know what the real situation with climate is going forward. I think the polar ice situation is changing very rapidly–within the next ten years. I also don’t think that there is anything we can do about it–it is just too late. Too much is baked into the cake.

      We have a lot of problems. One of them is that we have built a lot of long life infrastructure, and financed this infrastructure with debt, assuming that climate conditions would remain constant. If we look back throughout history, we could see that this, in fact, rarely happens for very long. It no doubt is true that if we added huge amounts more of fossil fuels to the world’s atmosphere, it would change the climate more than it otherwise would change. But the amount the models are assuming are added are ridiculously high.

      Our real problem is “Limits to Growth.” If most of us are dead in 20 years, and fossil fuel emissions are down to close to zero, what difference does climate change make anyhow? The earth has undergone changes in climate for its entire existence, and species have either adapted or been replaced by different species that could live with a different climate. Humans have lived (as hunter gatherers) through a wide range of climates. Talking about the issue of ocean level rising by a few feet, when we have many other, worse problems seems to me to be pointing to the wrong problem.

      If I could actually see any workable solution to climate change from something we could build, I might feel differently. The solutions that have been proposed are in my mind worthless. Planting trees and reducing population would seem to be the big ways of trying to fix the problem. I find “solutions” like offshore wind turbines that will be hard to keep repaired and terribly expensive downright silly. I cannot believe that there is any real savings in CO2, if all of the direct and indirect costs are included, and if the short true life span is considered.

      • Ert says:

        @Gail

        You are right – ocean rise is a “non” problem. Currently we add approx. 78 Million new people to the world – much more than the amount which would have to relocate per year due to ocean rise at a unclear time in the future.

        The big problem with climate change is food! One extreme summer or one extreme winter can kill fruit-trees and bushes in a horrific way. To much rain or much drought can affect the harvest of annual plants in a big way. Imagine a bad rice harvest in India, desertification in Mexico – or added problems in China to worsen. Where do all these affected people go? What do they do?

        And these are the scenarios I worry about.

      • Harry Willis says:

        Gail, One aspect of the climate change problem, which Kim is referring to I believe, is that CO2 emissions are not likely to stop simply with the collapse of industrial civilization. The “Slug Theory” of greenhouse gases is essentially a way of looking at the total carbon load placed in the atmosphere over time, and to a certain extent it doesn’t really matter what the rate of CO2 emissions is, so much as this total load, which determines the overall temperature rise. We calculate that so far we’ve placed, effectively, about 531 Gtons into the atmosphere; of this amount, however, only about 300 Gtons represent actual emissions. The balance is the result of deforestation, that is, disruption of the carbon cycle. There will be a lot more of this when fossil fuels run out or become too expensive to obtain, as Kim suggests. Witness what has gone on in Greece with mounting poverty and unemployment; the landscape is being denuded for firewood. A second effect is that disruption of climate patterns is likely to lead to increasing desertification of the Amazon, the “lungs” of the Earth. All of thes effects “count” toward the carbon budget of 1000 Gtons that a lot of forecasters allow us. I think it’s a serious mistake to consider climate change in terms of discrete problems like sea level rise or somewhat warmer summers in some parts of the world. These problems are almost cosmetic in terms of the real disruption that is going to occur as climate change progresses.

        • I agree. But is there anything we can do about these problems? Suppose population dies way back. Do we leave nice letters to the survivors, asking them to please leave the trees alone, because we need them to prevent climate change? As far as I can tell, people from earliest hunter gatherer days have done things to disrupt the climate (burned down trees, killed the largest animals that would have helped provide nourishment to trees). As much as we would like to change human behavior, most people are more concerned about themselves and their families living now, than they are about some unspecified other people living 100 years hence. If we don’t have any other energy solutions to people other than burning biomass and killing animals, I expect the situation will go on. We won’t be able to keep wind turbines, solar panels, and the stuff they operate in repair.

      • Don Stewart says:

        Dear Gail
        Did you see Courtney White’s article announcing the publication of his book this coming June?

        http://www.resilience.org/stories/2014-01-02/grass-soil-hope

        I want to respond to Guy McPherson’s accusation that the use of industrial technology to try to implement carbon farming is ridiculous. And I also want to respond to the earlier statement that we have a budget of 1000 Gtons of carbon to burn. My reading of the James Hansen article that I referenced in your last post is that our budget is actually 500. Hansen thinks we can sequester 100 Gtons with carbon farming. My argument, and apparently Courney White’s argument, is that we ought to promptly be getting about sequestering carbon using carbon farming.

        One quote from White:
        ‘Many meadows, valleys, and rangelands have witnessed a dramatic invasion of woody species, such as pinon and juniper trees, over the past century, mostly as a consequence of the suppression of natural fire and overgrazing by livestock (which removes the grass needed to carry a fire). The elimination of over-abundant trees by agencies and landowners, via prescribed fire or other means, has been the focus of much restoration activity in the Southwest recently. The general goal of this work is to encourage grass species to grow in place of trees, thus improving the carbon-storing capacity of the soil. Not only can soils store more CO2 than trees, they also have the advantage of relative permanence. Trees can burn up, be cut down, die of disease or old age, all of which can ultimately release stored CO2 back into the atmosphere.’

        If you go back to my description of the Aboriginal gardening of the continent of Australia, I think you will see the parallels with what White is describing. That is, in these arid and semi-arid regions, grass can be grown with the aid of fire. And grass, through its deep roots, can sequester a lot more carbon than scrubby trees. The same invasion of scrubby trees (and the resultant bush fires) was noted by early white Australian settlers once they had driven the Aborigines out.

        I will also note that the Aborigines were able to herd wild animals without fences through clever use of burning. When a small area is burned, it promptly grows lush grass, which attracts the animals. Thus, our current use of electric fences may not be essential if we can get as smart as the Aborigines were in 1788.

        Now let’s go to your despair about getting the citizenry to do anything at all. The Aborigines were responding to a religious duty, as well as something which was eminently practical. You know something about religions, so perhaps you might have some ideas about how to infuse carbon farming into the religious sensibility. Actually, I think that White would say that many ranchers DO have a religious sensibility. White apparently intends to show that carbon farming actually makes more money. If something can be both profitable and also satisfy one’s religious sensibilities, then why can’t we do it? The Aborigines used stone age technology.

        (I won’t get into White’s drawings of solar panels and windmills). (And I won’t comment further on ‘organic no-till’).

        Don Stewart

        • Harry Willis says:

          I wasn’t clear. I don’t disagree with you (or James Hansen) about the overall budget for carbon release. We’ve used about half of our “allowance” so far (531 gtons), in the form of direct emissions and deforestation. The 1,000 gton figure, as I understand it from watching a lecture on the “slug theory” from David Archer, is the total figure before exceeding the hypothetical 2 deg C limit. I also wonder about the over-simplicity of the “slug theory” when we consider the complications of feedback loops such as Arctic methane, which seems to have been triggered long before we hit any sort of “budget” limit, and may make this budget analysis more notional than real. So I’m interested to hear about these ideas of carbon sequestration which you’re describing. That may prove to be the only hope to avoid runaway.

          • Don Stewart says:

            Dear Harry
            Hansen thinks we have to stay below one degree C of warming, in order to preserve a climate friendly to humans. Which leads him to 500 Gtons. (He is using the paleoclimate record as opposed to models for his conclusions). BUT, we can use carbon farming to sequester some of the carbon already in the air…about 100 Gtons. Carbon farming experts such as Albert Bates and Lal at Ohio State and now White may offer up other alternatives to the 100 Gton estimate. I wish White’s book were available today, for a variety of reasons. I hope it lays out the arithmetic very clearly.

            Don Stewart

        • Ert says:

          @Don

          Carbon Farming is no panacea regarding to this paper: http://aciar.gov.au/files/node/14068/nutrients_the_real_constraint_to_sequestering_ca_61722.pdf

          “Together these data demonstrate that sequestering carbon into the stable SOC pool requires predictable amounts of N, P and S and that carbon sequestration will be limited where these nutrients are insufficient despite large amounts of carbon input.”

          • Don Stewart says:

            Dear Ert
            You will quickly get beyond my competence level. However, I will take a stab at the question.

            The article says that:
            ‘Despite some claims that SOC levels are directly related to C inputs only (e.g. Christopher
            and Lal 2007 and references therein), many studies have shown surprisingly little response in
            SOC due to large differences in residue input.’

            I can tell you that farmers around here who turn stubble under do not get any significant long term increase in humus levels. So I don’t think I have any disagreement with the article on that point. But… Now lets compare that to something which does seem to demonstrably work: rotational grazing. A cow crops grass, which loses biomass above the soil and so it sheds biomass below the soil. The biomass down in the soil has a complement of chemicals, including the ones mentioned. Those chemicals are available to make humus. Second, the cow eats the grass and then defecates and urinates and the nutrients are taken into the soil by, e.g., dung beetles, or soak into the soil. There are numerous pictures of fields which are side by side..one having been rotationally grazed and the other conventionally grazed. The topsoil depth in the rotationally grazed field and the measured soil carbon are dramatically higher in the rotationally grazed pastures.

            After an interval of rest, the land is again grazed and the cycle is repeated. So the perennial grasses are taking nutrients from deep in the soil and carbon and nitrogen out of the air and turning them into humus. The only purchased inputs are things such as watering tanks and electric fences. The Aborigines accomplished much the same thing with stone age technology and wild animals. I was just looking at Aldo Leopold’s Sand County Almanack, and back in the late 1940s he made a glancing reference to something like rotational grazing.

            Trees can also sequester quite a bit of carbon. The Pioneer Forest in Missouri is frequently cited as a good example of forest management for both timber harvest and also carbon storage. I think it is a true statement that in order to store vast amounts of carbon in trees (assuming 7 or 8 billion people), we would need to extend forests into desert areas. Might we be better off to aim at grasslands instead of forests? Courtney White’s article describes the grassland potential in the West, as opposed to the scrub which is now dominant there in many places. There have been some amazing restorations, such as terrible desert land in New Mexico which was an irrigated wheat field 60 years ago and grew practically nothing for decades and is now lush grassland.

            I am not so confident about annual agriculture. If there is an answer, I suspect it may need to involve biochar. Albert Bates describes biochar fields constructed 500 years ago which have in recent decades been rediscovered and farmed without fertilizers of any kind. Which implies that they have plenty of the nutrients described in the article.

            But no-till organic may be able to accomplish what the rotational cows are doing. For example, a nitrogen fixing cover crop is grown and then killed just at the point where it contains a maximum amount of nitrogen underground. Then a cash crop is sown directly into the residue. The residue from the cash crop is composted either in windrows or in place. A cover crop is drilled in and the cycle repeats. Since there is no tilling, the soil food web flourishes. The basic mechanisms are similar to rotational grazing: roots dying underground and soil critters taking surface litter into the soil. It’s probably just not as efficient since the root structure for annuals is not nearly the same as perennial grasses. If you have seen Wes Jackson’s big hanging scroll showing the roots of a domesticated annual wheat plant and a wild wheat plant, you know what I mean.

            Here are some videos from a farmer conference in North Dakota. For the short version, go to the 12 minute mark in the first video and you will see measurements of the soil biology. Note especially the comparison to the virtually dead Iowa conventional (Monsantoized) corn field. In the second video, by Paul Brown, I recommend the whole thing. He notes that the estimated soil carbon content before European settlement was 12 percent. He now has his farm up to 5 percent and is shooting for 7 percent in the short term. Listen to his description of how the litter after the grazing mob has passed through is attacked by the soil food web and stored in the soil.
            http://www.bcscd.com/?id=64

            Don Stewart

          • Thanks! I remember seeing something about additional requirements beyond carbon previously.

    • Peak oil will not stop global warming. The numbers are here:

      16/5/2013
      Half of oil burnable in 2000-2050 to keep us within 2 degrees warming has been used up as we hit 400 ppm
      http://crudeoilpeak.info/half-of-oil-burnable-in-2000-2050-to-keep-us-within-2-degrees-warming-has-been-used-up-as-we-hit-400-ppm

      The additional CO2 in the atmosphere – equivalent to 100 ppm = 400 ppm now minus 300 ppm in warm periods under natural climate change – must be considered as a physical debt. While in theory at least the financial debt problem can be “solved” with a currency reform like Germany had in 1948
      http://germanhistorydocs.ghi-dc.org/sub_image.cfm?image_id=1018
      the CO2 debt cannot be easily removed.

      9/11/2011
      System Dynamics peak oil, financial and CO2 debt, ME geopolitics
      http://crudeoilpeak.info/system-dynamics-peak-oil-financial-and-co2-debt-me-geopolitics

      • I see oil, coal, and natural gas consumption all dropping very quickly, very soon, because without our industrial economy, we cannot keep the whole system going that we need for extraction. Thus, most of the “other half” of oil will be left in the ground, as will more than half of natural gas and coal. The real problem will be people cutting down trees.

        • John Drake says:

          Without the support and resources of a high tech industrial society, who will maintain, safely close and dismantle the more than 400 nuclear fission power plants currently existing on the planet today along with the numerous other radioactive toxic waste cooling ponds & storage sites?

          If noboby is around with high tech resources to take care of these nuclear facilities, life as we know it on planet Earth will simply cease to exist within a relatively short time frame due to blow-ups, leaks and trade winds…

          Try to imagine a Fukushima X 400 but with nobody around to do much about it.

          Remember the 1959 “On the Beach” movie?

          • I don’t know if it will be quite that bad, but I have a hard time getting enthusiastic about nuclear for this reason. We can’t possibly safely close and dismantle them.

        • This will not be such a big problem. Cutting down trees rapidly takes Chainsaws. People will not be cutting down trees too fast with hand axes. With a population contraction, even less muscle power is available for downing trees.

          RE

          • Jan Steinman says:

            “Population contraction” is a process, not an event. According to Limits to Growth, the “contraction” may take decades. There’s a lot of time left for cutting down trees.

            Keep in mind that Easter Island was denuded without the help of chain saws.

            In Alaska, the trees seem infinite, and with any luck, they’ll be spared. But within a day’s journey of a major population centre? I’m not so sure there will be any trees standing there.

    • Paul says:

      Good point – people in cold climates will almost certainly burn our remaining forests to keep warm.

      I saw articles of this nature re: greece last winter.

      • Jan Steinman says:

        “people in cold climates will almost certainly burn our remaining forests to keep warm.”

        One of the reasons we picked a spot that backs thousands of acres of wild public parkland.

        Another reasons we picked this spot was for our neighbours.

        If governments fail, we and our neighbours may well become the de-facto stewards of this resource. “A cord per acre per year” is the rule of thumb for managing woodlots. So that forest could supply a thousand households’ needs.

      • No they won’t. They did not in the past, no reason they would do so in the future.

        I live in a cold climate Paul. Alaska. This concept that all the trees will be burned for heat is a conceit of people who don’t know how to live in a cold climate, which is most of you.

        Forests did not get burned in the past for heating or cooking. they were burned to smelt metal and glaze pottery. Gail doesn’t get this, no matter how often I hammer it down on her.

        RE

        • Jan Steinman says:

          “Forests did not get burned in the past for heating or cooking…”

          You mean, “Forests did not get burned in a past when there were 1/8th the number of people around to burn them.”

          The concentration of population centres make it a different game now. Think post-war Germany, when city dwellers burned priceless antiques to heat their homes.

          • City Dwellers are stuck in the City Jan. They may burn all their furniture and the buildings too.

            They will not however make it to Siberia or Alaska to burn those trees. In fact I doubt many will even make it as far as WV or ID to burn those trees either.

            The people will die faster than the trees. The population is likely to be a good deal less than 1/8th of what it is now. Go an order of magnitude up from that estimate.

            RE

  39. Re item 7: The WSJ article says: “Since 2008, deep-pocketed foreign investors have subsidized the U.S. energy boom, as oil and gas companies spent far more money on leasing and drilling than they made selling crude and natural gas.”
    http://ohiocitizen.org/for-u-s-drillers-the-days-of-easy-money-end/

    My assumption was that the tight oil and shale gas boom was financed via Quantitative Easing. I wonder how many per cent these foreign investors have contributed.

    • I expect that it is the combination of foreign investors and quantitative easing that have subsidized the investment. It is easy to pull the wool over people’s eyes for a while. I expect that the foreign investors were naive with respect to what they were getting. Now, it is becoming clear that shipping something that is close to natural gas liquids by railroad isn’t very safe. That will add to the price of railroad shipment, and make the economics even more dubious than they were before.

    • Paul says:

      Doesn’t the cash from QE (that the elites can access at zirp) that is looking for a return end up in things like fracking – housing bubbles etc?

      The ultra wealthy are all about leveraging up — and they have the means to do so.

      So I do think that the source of much of the money in fracking is QE.

  40. Jan Steinman says:

    “Lack of economic growth eventually affects stock market prices…”

    Unless the Fed keeps printing money?

    Seems to me that all the Quantatative Easing has gone directly into an overheated stock market.

    I’m not necessarily disagreeing with you, but sometimes the connection is not very clear.

    • Ert says:

      @Jan

      Forgive my ‘economic’ English if the following lines may not always be precise – I’m not a native speaker/writer.

      The thing with QE is – that it is liquidity injection on behalf of the balance sheet expansion of the central bank. It is not expansion of credit money – which has to be between a regular bank and someone (or entity) which takes out a credit (loan) based upon a security (legal property title – not a possession.. big difference).

      Still if no – or to little – investments in real world assets (buildings, inventions following a “patent”, etc.) are taking place the whole of the money (credit based and central bank liquidity injections) may bid onto the diminishing real wold assets. In my view this is “real” price inflation!

      The problem comes when the central bank tries to collect/reduces its “liquidity injections” (QE). If the “real economy” does not produce “real assets” that could be new securities (for loans) for the global sum of all QE like things that have been done (in the US, UK, Japan, EU) – then QE must be extended, pretend and go on for ever – or we need some real inflation to reduce relative burden.

      But if we move in the economic territory Gail sees – then we have a problem,

      • Danny says:

        We can’t have real inflation that would not put us in any better of a situation. Unless maybe you could ramp up inflation real fast and then slam on the brakes really hard…pay off debts when inflation is really high and then bring us to deflation….I just don’t see an easy way out….maybe re- issue a new currency….

        • Ert says:

          @Danny

          As I described – the only way out is that we have real expansion, build new stuff, have new people that take on new credit! Since such stupid things as ressource-limits and energy do not concern the theoretical models of most our (central) bankers and politicians…. they may think this is a way out.

          And you are right: There is no (easy) way out – and a new currency does not solve the underlying problems. A debt cut, a new currency, etc. – they would all make it worse, because the trust would vanish and the whole global card game could implode.

          • you can’t build ‘stuff’, new or otherwise, without input of raw materials in a hard physical sense.
            and digging up raw materials requires ever increasing amounts of energy—which is the commodity (in terms of price) which is in short supply.

        • The problem is that the governments don’t stay together. We will have a lot more small countries or tribes, each with their own dictator, king, or other simple government. Trading among these small countries will be a problem. Many of them will be at war, trying to get resources from others.

    • I am not sure how long this money printing can continue. I am sure that they will continue printing, as long as they can.

      • Lindon says:

        Imagine a band of cut-throat brigands for a moment. These brigands have historically made their “living” off of extorting and robbing the population, as well as fighting amongst each other to steal and/or cheat from each other. This band of brigands one day is suddenly faced with a deadly external threat, and the brigands all realize that unless they stick together and stop attacking each other, they will die. So, the brigands come together, they agree to stop fighting amongst each other, cease their efforts to collect debts or eek out revenge on one another, and they agree to “areas of operation” in which each brigand gets a cut of the population and geography to continue plundering in order to “make a living”.

        The band of brigands, of course, is the world governments. It seems to me, that as long as the band of brigands maintain their agreements between each other, that QE and perpetual low interest rates could go on for quite a while — but NOT past the point where resources run out. Eventually, one of these brigands will “spook”, will see a near-term break-up of the band approaching, and decide to launch a pre-emptive strike on one or more of the other brigands so as to gain the upper hand. When that happens, watch out!

        • That is an interesting analogy. I think that we are seeing a number of countries collapsing already–Egypt, Syria, Libya, perhaps Iraq. I am sure there are others not too far away from collapse, like India. It may be that the collapses that are already occurring spread refugees to other areas, and those refugees help push other areas to collapse.

          • Lindon says:

            I think the point I was trying to make with my analogy is that the band of brigands has been sticking together — which is why all the fraudulent financial market manipulations and QE and all that didn’t result in the collapse that we’ve been suspecting is “right around the corner” these last couple of years or so. But now, with resources drying up (Egypt running out of oil to sell, for example), the game is up for some of the smaller and weaker brigands, and like you say, once the “little guys” start running for cover, it probably won’t be long before one or more of the “big guys” decides to take matters into their own hands. Once that happens, all agreements are broke and chaos will unfold. That moment feels very near, to me.

          • Paul says:

            Some months ago I was in Egypt and was at one of the (very violent) rallies – the people there are truly desperate – watching them attack the authorities one got the sense that they had given up – they no longer cared – because really they have no hope.

            There are now some districts around Cairo that locals will not even venture into – the police are no longer active – there are no rules.

            This truly is a country on the brink of being a failed state – Saudi and US money are holding it together like duct tape on a rotting steam pipe – for now.

      • sponia says:

        Amen!

        • sponia says:

          re: “I am sure that they will continue printing, as long as they can.”
          Amen!

          • Paul says:

            I used to think that QE and ZIRP were insane policies.

            I now think they are very wise policies – because they are all that stand between us and one hell of a mess.

            And once they are no longer effective – there is nothing else – we will see what would have happened in 08 if the central banks had let things run their course.

            Every day they kick the can a bit further is worth celebrating 🙂

  41. Mark N says:

    Great stuff as always Gail! I don’t comment much but I have read every post you have written here and many at The Oil Drum. I have greatly enjoyed watching you chip away at this complex problem and through the years a clear picture of the actual state of industrial civilization has emerged. I thank you for all of your hard work and I have enjoyed the proverbial ride.

    • I was hoping this one would pull together some more introductory points, so could be shared more widely.

    • I was hoping this one would pull together some more introductory points, so could be shared more widely.

      • Mark N says:

        I appreciate this post after reading about limits to growth for years. The subject is so complex examination from every angle helps me wrap my head around it.

      • Paul says:

        Gail – I also look forward to every new article since discovering this blog.

        I wonder if you might write summary that provides insights into how people might prepare for what is imminent.

        • Jan Steinman says:

          “I wonder if you might write summary that provides insights into how people might prepare for what is imminent.”

          I’m not Gail, but I’ll take a crack at it.

          Acquire practical skills. Are you a middle-manager, bureaucrat, or financial analyst? Too bad! Figure out how to grow food, fix things, or entertain people. If you can learn something that you can do directly and independently for another individual that will physically improve their life, they may be willing to feed you. Otherwise, better plan to learn to feed yourself.

          (Directly means you provide a product or service for another person, small business, or group of people. It specifically excludes working for a corporation, government, or institution with a hierarchy and more than ~50 people.

          Independently means you can practice this craft without dependence on more than a modicum of others — no electronics, no complex tools that require constant spare parts, no external information sources, etc. If you do have such dependencies, learn all you can about them. Have you taken up weaving? Learn how to spin, and learn enough carpentry to maintain your loom.)

          Simplify your life. If you have investments that are not directly and independently a means of production of the practical skills you’ve acquired, sell them and purchase tools of your practical skills trade. Your 401k won’t be worth anything soon, but a set of leather-working tools, or a serviceable treadle sewing machine, or some light farm equipment might be worth a lot. Reduce the amount of “stuff” that you need to maintain to that which can make you useful to someone else.

          Hedge your bets. No one knows how long we can keep kicking that can down the road. Yea, get out of financial investments, but don’t put all that money into buggy whips… yet. Some think gold will hold value for some time, but you can’t eat it. There may never be a better time to buy storable staple foods — grains, beans, etc. — but you’ll need a cool, dry place to store them that does not require constant energy. (In other words, frozen foods don’t count.) If you’ve developed a practical skill to a high degree and have a penchant for teaching, perhaps you can hoard excess tools of your trade, for later use by apprentices or trainees. Books are always a good choice, since on-line information will only be available for the life of a disk drive. (Although in the spirit of bet-hedging, I’m collecting practical skills documentation in soft form on Kindles, because their static display uses no power until you “turn” the page.)

          (To summarize “bet hedging,” I’m not really talking about things like diversifying investments; I’m talking about re-investing in a way that will suit the broadest spectrum of possible future worlds. If you choose to grow food (for example), by all means, stay on the green and sustainable side of current trends, but unless you are really trying to prove something, don’t chuck all of modern agriculture for a team of horses. The modern ag baby is still useful, even if you despise the fossil sunlight bath water that makes it possible.)

          Get out of Dodge. This may well be the toughest thing for many who have grown up in cities and suburbs, but it doesn’t necessarily mean forty acres and a mule. The death of the small town is over-reported and simply not true in a lot of cases. There are lots of vibrant, mutually-supportive small towns left! Look for one with a well-cared look about it. I’d look for around 10,000 people or less. But I think cities are going to increasingly offer only two choices: lord, or serf. Do you think you have the skills and connections to be the lord? If not, do you want to be a serf? If not, get out of the major population centres. Quickly.

          Throw your lot in with others. This should probably top the list! The days of independence via forty acres and a mule are over. Rugged individualism is an artifact of excess energy. Unless you don’t plan to live past your prime, you’d better start working on making yourself useful to young people, and not necessarily just those you have spawned. Start “collecting people” with a wide variety of practical skills. Hone your social and interpersonal skills — Homo sapiens v. petroleumus is not used to co-operating unless told to do so by a boss, teacher, parent, etc. Hierarchies will flatten, and your choice may be between serving a feudal lord, or practicing consensus — not an easy task — within a group of peers. Good negotiating skills may well be worth more than millions of dollars in gold! Ostracism from a group may mean death.

          At least, this has been my strategy. Unfortunately, it can’t be tested while the Internet is still running, but so far, my “bet hedging” is showing this to be a sound strategy in a small community. Most of the time, I’m happy as a clam in my new world, even if civilization doesn’t collapse.

          • That sounds like a fairly good list. I might add that I think living out in the country by yourself may be a problem–too much chance of violence by someone who wants the stuff you are hoarding or your farm. Also, walking to town for everything will get old quickly, if you don’t have a means of transport.

            • Jan Steinman says:

              “I think living out in the country by yourself may be a problem–too much chance of violence by someone who wants the stuff you are hoarding or your farm.”

              I heartily agree! That’s why I brought up small towns.

              If you’re considerably less than a half-day’s wagon ride to a small town, that may be close enough.

              And for heaven’s sake, don’t do the hermit-thing! Make yourself useful to the townfolk! If you supply something they really need, they’ll stand by you when you are in need. Think the final scene from “Witness,” when the Amish all gathered around, and Harrison Ford shouts to the bad guys, “What are you gonna do? Kill them all?”

          • Paul says:

            Thanks for the input Jan – I agree with all of those things and am doing what I can – timing is as usual – a big issue with this.

            Interestingly we bought our small plot in Indonesia in 2008 when the world was collapsing around us thinking money was going to be made worthless – then when the central banks road to the rescue we thought that would delay things for a couple of years at best – but here we are 6 years later.

            One thing that has changed in my outlook over the past few months is that my suspicions that this was energy related have pretty much been confirmed.

            I am now looking at this from an entirely different perspective – I used to think the crash would come – you hold some gold and you get through it – then we continue on our suicidal road to disaster as our infinite growth model kicked back in.

            I now think that with a great deal of certainty that when this next iteration of the never-ending crisis hits that there will be no bailouts and no rebound – because the chaos that is imminent will preclude either of those.

            I think that energy plays will be insolvent – not only will their not be no interest funny money to float them – even if there were some way to keep them going nobody will have a job so nobody will be able to pay for this energy.

            This motivates me to accelerate plans to prepare for what is coming – when this comes I think it will be swift – I am sure governments are putting in plans to try to keep things under control – but I don’t see that working (at least not for long) because as strategic reserves of fuel run out chaos will reign.

            A lot people are either ignorant – or like deer caught in the headlights – even though they can see the writing on the wall actually accepting what is imminent is too difficult for them – too surreal – so they are doing nothing.

            I have friends and a brother who are fairly switched on – and they have seen the FT and Guardian articles above – they agree there is a problem – but they fall back on the assumption that surely there will be a solution unveiled at the last hour.

            There is no solution – there is no miracle. We have lived as we do only because we had this gift (well no – actually it’s a curse) of this enormous pool of oil bubbling out of the ground. It is gone. Nothing can replace it.

            • Jan Steinman says:

              “There is no solution – there is no miracle… Nothing can replace it.”

              I’m still hoping for aliens to drop out of the sky and give us the secret of zero-point energy.

              Seems about as likely as any of the other “hopium” that people are clinging to… 🙂

          • Ert says:

            @Jan

            Regarding Zero Point Energy – here you go: http://stargate.wikia.com/wiki/Zero_Point_Module

            Now you only have to find an ‘Ancient’ 😉

            • Jan Steinman says:

              Forgive my error. I apparently should have said “Altair” instead of “Alpha Centauri.” Now I have to re-align the holes in my tinfoil hat so I can call the proper aliens.

              But it looks like one of them has taken Ben Bernake’s job, so perhaps there’s hope… 😉

  42. Gidon Gerber says:

    9. The fact that the world is finite has been omitted from virtually every model predicting the future.

    I can think of two famous and influential works, which are based on the finite-world assumption:
    Malthus T.R. 1798. An Essay on the Principle of Population.
    Meadows D. et al. 1972. The Limits to Growth

    • Jan Steinman says:

      Malthus wasn’t wrong. He just didn’t anticipate the deus ex machina effect that fossil sunlight would have on population.

      Perhaps Little Green Men will descend from Alpha Centauri and give us the secret of zero-point energy, and Malthus will be thwarted yet again. Or perhaps pigs will begin to fly…

    • You are right. The 1972 Limits to Growth book got the story almost entirely right. The point they missed has to do with the financial system, and the role of debt. But I know one of the problems the authors foresaw was the difficulty in getting enough investment capital from prior investment, as it became harder to extract resources. They were expecting that investment capital would come from cash flow, not from more debt.

  43. Stilgar Wilcox says:

    I wrote my post above before the 2014 correction. And my question at the end is of course rhetorical. Happy New Year, Gail.

  44. Stilgar Wilcox says:

    In the last sentence you have 2015, but I’m figuring you meant 2014?

    Gail, you wrote: “The public has been placated by all kinds of misleading stories about how oil from shale will be the solution. Quantitative Easing (used by governments to lower interest rates) has temporarily allowed stock markets to soar, and allowed interest rates to stay quite low. So superficially, everything looks great. The question is how long all of this will last.”

    I agree, and it is amazing how the media and cornucopians alike, such as my wife, are running with this QE’d zero interest rate, give the wealthy a boost to ignite the stock market and hope it stimulates enough growth so we can ignore precipitously dropping EROEI, we’re back baby meme. My wife looks at me now like I was out of my mind talking the way I was about peak oil, diminishing returns, etc. I have no ammunition now because there are no words to deter her from the fantasy of all is good in mudville. But I’m curiously waiting though to see how long this extend & pretend can be perpetrated. What will be the first big crack in the wall of BAU?

    • I fixed 2015 to 2014 a few minutes ago.

      Yes, there seem to be an awfully lot of people who believe the story the media is telling. I was hoping that this was a simple enough explanation of the problem that a few would understand. I suppose a person can hit one’s head against the wall, trying to explain the other direction as well. If the growth is all financed by increasing debt at very low interest rates, it is hard to believe it will last very long.

      • Danny says:

        ” If the growth is all financed by increasing debt at very low interest rates, it is hard to believe it will last very long”. But what about Japan? They have been financing their growth for a long time. People have to believe the story or the crash happens very quickly but as long as you can have people believing that everything is fine it will be for some time until we start to see declines in shale production in about 3 or 4 years from now. Then I believe the veil will be lifted. Don’t be surprised about your wife Wilcox I have talked with people with PHD’s who have no idea what is going on. Danny

        • Chris Johnson says:

          @Danny
          Regarding Japan’s financial stability, Japan has an asset that we generally overlook: the Japan Post Holdings, which includes their savings bank as well as postal services and insurance. It’s one of the top 20 largest companies in the world, and keeps a low profile. But it may well serve as an effective anchor for Japan in the turbulent world financial waters. I don’t know much more than that, and would hope to find someone who could explain how this system works and is used.

        • Japan has operated in a period of world history where the economic condition of the world as a whole was pretty good. This helped keep them going. I am sure that their day will come too, but I haven’t looked at the numbers to tell when that might be. Japan is one of a few countries in the world where population is actually falling, seeming to indicate that the people there realize that conditions aren’t very good. A person wonders how the current situation can continue, but it does.

          • Chris Johnson says:

            Good assessment, Gail. Japan’s GDP to debt ratio is also pretty high, but Abenomics appears to have reduced the threat of continuing deflation as it stimulated stock market and the economy in general. For the first time in 20 years Japanese are regaining pride and confidence. Abe is also pushing some nationalistic buttons vis-a-vis China, and has recently worked to solidify support and ties with Southeast Asian states and India to ally against Chinese bullying. Finally, the 20 year gradual decline in the value of the yen has made Japanese manufactures more economic — the GDP per capita of Korea, Japan, Taiwan and Hong Kong are all in the low to mid $30s, a big drop from 1990. Singapore is higher by $20 some; China’s average is somewhere in the $6 to $8 range, but varies by a few factors between the coastal boomlands and the interior that hasn’t changed much for several hundred years.
            Demographics weigh heavily in Japan and also China, which is a decade or two behind Japan in the ‘graying’. I’ve read that knowledgeable observers say that Japan’s population of 150m could drop by a third or more within the next 15-20 years. China is expected to flatten and get grayer, but not drop in aggregate. However, the minorities (about 2-300 million non-Han) in the south, southwest and west, as well as inner-Mongolia and Manchuria, are reported to be increasingly disgruntled at being left off the fast growth train and have lost property to merciless local rulers. It’s gonna be interesting.

        • Paul says:

          Japan was an island of desperation operating in a world that was relatively robust.

          Japan could still remain strong by exporting to the rest of the world.

          But now most of the world is in the same boat as Japan.

          This situation will not mimic that of japan – we will not get two decades of money printing. Absolutely no way

      • Chris Johnson says:

        Here’s an example, I think, of the apparent contradictions between the reports about declining oil production worldwide and reports about newly discovered fields that promise almost unlimited opportunities. Can both be correct?

        http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields
        http://www.eia.gov/todayinenergy/detail.cfm?id=11611

        • Shale resources are globally abundant, but they are too expensive to produce for the financials to work out. This problem is being hidden by ever more debt at very low interest rates. It can’t go on. We will have to wait and see how long it takes for the floor to fall out. Paying more to transfer shale oil by railroad car because it tends to explode is likely to be a push downward as well. It really needs pipelines, but the shale wells drop in volume so quickly, it does’t make economic sense to build pipelines.

          • Chris Johnson says:

            Goodness, the implications are that EIA isn’t telling the whole story.

          • Paul says:

            What the pollyannas fail to explain is that the problem we are facing is not the end of oil – it is the end of cheap oil.

            The way to think of this is — imagine we found an ocean of oil on the moon bigger and deeper than the entire Pacific Ocean.

            Would that solve our problem? Of course not – because it would cost too much to bring it to earth.

            Similarly what is left on earth is expensive – so the amount of work we get out vs what goes in is reducing — and that means growth contracts – and eventually it ends (because nobody will have the means to buy this expensive energy)

            It really is as simple as that

    • Paul says:

      Until this stuff goes MSM then for most they will refuse to believe it is happening.

      This info is starting to appear in the MSM now….

      Former BP geologist: peak oil is here and it will ‘break economies’
      http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession

      The decline of the world’s major oil fields
      Aging giant fields produce more than half of global oil supply and are already declining as group, Cobb writes. Research suggests that their annual production decline rates are likely to accelerate.
      http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

      Toil for oil means industry sums do not add up

      Rising costs are being met only by ever smaller increases in supply
      The most interesting message in this year’s World Energy Outlook from the International Energy Agency is also its most disturbing.

      Over the past decade, the oil and gas industry’s upstream investments have registered an astronomical increase, but these ever higher levels of capital expenditure have yielded ever smaller increases in the global oil supply. Even these have only been made possible by record high oil prices. This should be a reality check for those now hyping a new age of global oil abundance.

      According to the 2013 WEO, the total world oil supply in 2012 was 87.1m barrels a day, an increase of 11.9mbd over the 75.2mbd produced in 2000.

      However, less than one-third of this increase was in the form of conventional crude oil, and more than two-thirds was therefore either what the IEA calls unconventional crude (light-tight oil, oil sands, and deep/ultra-deepwater oil) or natural-gas liquids (NGLs).

      This distinction matters because unconventional crude has a higher cost than conventional crude, while NGLs have a lower energy density.

      The IEA’s long-run cost curve has conventional crude in a range of $10-$70 a barrel, whereas for unconventional crude the ranges are higher: $50-$90 a barrel for oil sands, $50-$100 for light-tight oil, and $70-$90 for ultra-deep water. Meanwhile, in terms of energy content, a barrel of crude oil is worth 1.4 barrels of NGLs.

      Threefold rise
      The much higher cost of developing unconventional crude resources and the lower energy density of NGLs explain why, as these sources have increased their share of supply, the industry’s upstream capex has increased. But the sheer scale of the increase is staggering: upstream outlays have risen more than threefold in real terms over the past 12 years, reaching nearly $700bn in 2012 compared with only $250bn in 2000 (both figures in constant 2012 dollars).

      Coinciding with the rise in US tight-oil production, most of this increase in upstream capex has occurred since 2005, as investments have effectively doubled from $350bn in that year to nearly $700bn in 2012 (again in 2012 dollars).

      All of which means the 2013 WEO has the oil industry’s upstream capex rising by nearly 180 per cent since 2000, but the global oil supply (adjusted for energy content) by only 14 per cent. The most straightforward interpretation of this data is that the economics of oil have become completely dislocated from historic norms since 2000 (and especially since 2005), with the industry investing at exponentially higher rates for increasingly small incremental yields of energy.

      The industry has been able and willing to finance such a dramatic increase in its capital investment since 2000 owing to the similarly dramatic increase in prices. BP data show that the average price of Brent crude in real terms increased from $38 a barrel in 2000 to $112 in 2012 (in constant 2011 dollars), which represents a 195 per cent increase, slightly greater in fact than the increase in industry capex over the same period.

      However, looking only at the period since 2005, capital outlays have risen faster than prices (90 per cent and 75 per cent respectively), while in the past two years capex has risen by a further 20 per cent (the IEA estimates 2013 upstream capex at $710bn versus $590bn in 2011), while Brent prices have actually averaged about $5 a barrel less this year than in 2011.

      Iran not a game changer
      That prices have fallen slightly since 2011 while capex has risen by a further 20 per cent is a flashing light on the industry’s dashboard indicating that its upstream growth engine may finally be overheating.

      Without a significant technological breakthrough reversing the geological forces that have driven the unprecedented increase in upstream investment over the past decade, prices will have to rise further in real terms from here or else capex – and with it future oil production – will fall.

      It should also be emphasised that this vast increase in capex has occurred during a prolonged period of record-low interest rates. Once interest rates start rising again, this will put further pressure on the industry’s ability to make the massive capital outlays required to keep supply growing.

      Of course, the diplomatic breakthrough achieved with Iran over the weekend could provide some much needed short-term relief to the market, as Iran’s exports could ultimately increase by up to 1.5m barrels a day if and when western sanctions were to be fully lifted. But this would not change the dynamics of the industry’s capex treadmill in any fundamental sense.

      Even if global oil demand only grows at 1 per cent a cent a year, those extra barrels would be would be fully absorbed by the market within about 18 months. And that is probably how long it would take for Iran’s production and exports to return to pre-sanctions levels in any case.

      Alternatively, if we take the IEA’s estimate that global production of conventional crude oil from all currently producing fields will decline by 41m barrels a day by 2035 (that is, by an average of 1.9m barrels a day per year), then Iran’s potential increase of 1.5m barrels a day would compensate for just 10 months of natural decline in global conventional-crude output.

      In short, behind the hubbub of market hype about a new age of oil abundance, the toil for oil is in fact now more arduous and back-breaking than ever.

      This should worry everybody, because with the evidence suggesting that consumers are reluctant to pay much above $110 a barrel, it is an open question what happens next to the industry’s investment plans and hence, over time, to the supply of oil.
      Mark Lewis is an independent energy analyst and former head of energy research in commodities at Deutsche Bank; Daniel L Davis, a lieutenant colonel in the US Army, is co-author

      • SlowRider says:

        You have a good knowledge about the oil industry.
        Most oil companies have performed badly for some years now (i.e. Shell, BP, Statoil, CNOOC), except for some big US corporations like Exxon and Chevron that just followed the general equity boom. Any comments on that?

        • Paul says:

          This says it all:

          The decline of the world’s major oil fields Aging giant fields produce more than half of global oil supply and are already declining as group, Cobb writes. Research suggests that their annual production decline rates are likely to accelerate.
          http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

          I think the only reason alternative energy plays are happening is because of QE ZIRP. Money will always look for a home and there are of course bubbles all over the place as Central Banks continue to unleash oceans of free cash – I think a great deal of this money has flooded into fracking because the frackers have made up a very appealing story and they have caught a wave.

          Of course the wave will smash investors in this short term play into the rocks at some point – I see this ending when shale peaks (most of what I see says max 2020) – or when interest rates rise crashing this bubble (well — that would crash the entire global economy because higher interests will reveal who is swimming naked – as Warren Buffett the crony capitalist might say – and almost everyone is now skinny dipping).

          I think most of these frackers will end up bankrupt – there is a reason why Big Oil is not participating in this madness.

  45. kiwichick says:

    2015???

  46. As the example of Egypt shows we have now the problem that certain countries hit their limits to growth while population is still increasing. I had done some number crunching in these 2 posts:

    6/7/2013
    Egypt’s future crude oil import requirements for 3 population scenarios
    http://crudeoilpeak.info/egypts-future-crude-oil-import-requirements-for-3-population-scenarios

    4/7/2013
    2/3 of Egypt’s oil is gone 20 years after its peak
    http://crudeoilpeak.info/23-of-egypt%e2%80%99s-oil-is-gone-20-years-after-its-peak

    Given Egypt’s strategic location on the world map it is in everyone’s interest that sufficient oil is supplied to this country. It will have to come from Middle East OPEC.This oil will not be available for export e.g. to Asia.

    • Egypt has a huge population, and a real problem. Syria is not far behind in its problems. Yemen is fighting oil decline as well, and has a big population, too. And Libya has shown that if a leader is overthrown, even a small population can divide into warring factions. Keeping peace in the Middle East is likely to be difficult in the years ahead.

    • Ert says:

      @Mushalik

      India already has such a problem. Here is a Google-Translate Link for a German article: http://translate.google.de/translate?hl=de&sl=auto&tl=en&u=http%3A%2F%2Fwww.peak-oil.com%2F2013%2F08%2Findien-wirtschaftskrise-durch-oelabhaengigkeit%2F&sandbox=1

      India spends already 100 Billion, approx. 30% of their trade-income, for oil imports (um from approx. 5 Billion in 1998! Also India has the second largest trade deficit (after the US). In addition they provide food subsidies for now approx. 800 Million and subsidize their domestic fuel (like Egypt)!

      Interesting prospects…

      • Thanks! I spoke at an energy conference in India in October 2012. It was amazing how focused the people from India were on getting the living standards up for the Indian people. Of course, this almost always requires more fossil fuels. I showed graphs regarding how oil imports were rising for India, and talked about some of the financial issues.

        I don’t know how you convince people to go the other direction–use less fossil fuels, and limit population size, unless the financial situation enforces a change on the country.

        • Ert says:

          @Gail

          I do neither know it.

          So currently I try to write down all I know and think about Energy, Economy, Demographics, Climate Change, Food, Water, Society – in a paper (or little book) which no one may read. But I will try to spread it to (some) close persons to me – and encourage those to read it.

          I also try to aim to the state that Meadows mentioned in the interview I linked below. But it is hard for me to foster social connections to people that have totally different values and goals.

          Interviewer: How do you keep up your spirits?

          Meadows: Two Ways.

          1. One is to realize that you don’t have to change the world. Ethically as a person you need only have to behave in a way, such that if everybody behave that way it would solve the problem.

          2. The second way is to shrink you boundaries. I used to be worried about the global climates, now I’m worried about how to foster social connections inside my town

        • Paul says:

          When an intelligent educated person is unable to see what is really quite obvious that tells me that absolutely astounding levels of cognitive dissonance are at work.

          People believe technology will solve the problems – well guess what – there are plenty of problems technology has solved – baldness – cancer – turning lead into gold – I could go on for hours.

          I also hear that once oil becomes too expensive the motive will be there to replace expensive oil – well – we’re there, expensive oil is taking down the global economy – and I see nothing on the horizon.

  47. pottersranch says:

    Gail I am a beekeeper and in the first paragraph I think you really touched on the plight of the honey bee. Things do not look good for our pollinators, and they may be the canary in the coal mine for us and our industrial food system.
    I am so thankful for you, you write so clearly that anyone can understand your point of view. It took me months of reading to get my mind around peak oil and you bring our economic situation to the front with clarity.
    I adore you!

  48. John Drake says:

    The interface between the energy world and Main Street is Wall Street.

    Hence the net energy crisis that we are currently undergoing will likely first hit through the financial world.

    Massive government borrowing and virtual money creation à la quantitative easing have limits. Since September 2008 these instruments have been massively used to mask the dramatic reality of an increasing lack of available net energy to sustain the current economy and generate real growth. But 2014 could be the year when key financial stakeholders realize that the massively indebted “King is naked”…

    If that was to happen, what took place in September 2008 would look like a slight breeze compared to the blizzard that would hit the financial system.

    Another so called “liquidity crisis”, “trouble” on the OTC derivatives market, a significant rise in interbank interest rates, the equity markets plunging, major losses by a few big financial institutions, a US Treasury and a Fed with their backs against the wall with no credible munition left, a run on the US dollar, a direct or indirect default on the US government debt, a loss of all the privileges resulting from having a currency that is also the primary international reserve currency would seriously impair the US capacity to readily pay for any imports and sink the US citizen standard of living down to a level that would create major social unrest and imperil the stability of the current US political regime…

    The US international status could abruptly shift as the UK and USSR did during the 20th Century…

    If TPTB see this mother of all financial crisis coming, they might decide to preempt some of its effects by launching the US into a major international military adventure that would essentially aim at preventing a collapse of the current – still weakly US led – international order while “phase shifting” the country into a centrally planned and information managed “streamlined” war economy in which the ability of citizens to criticise decisions made by TPTB would be considerably limited…

    But, keep an eye on China. Its energy use has more than doubled in 10 years, it has its own domestic problems and might decide to launch an “international initiative” to redraw the current world order before the US does…

    • I am afraid you are right. I was trying to write kind of an overview, without going into everything that might go wrong.

      I am sure that China would like to keep its now economy going, whatever happens to other major powers. It seems to be at least a little more aware of what is happening, so it may try things on its own.